Exhibit 10.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
BIODELIVERY SCIENCES INTERNATIONAL, INC.
ARIUS ACQUISITION CORP.
AND
ARIUS PHARMACEUTICALS, INC.
XXXX X. XXXXX
AND
XXXXXX X. XXXX
August 10, 2004
TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS 1
Section 1.1 Defined Terms 1
ARTICLE II. THE MERGER 2
Section 2.1 The Merger 2
Section 2.2 Closing; Effective Time 2
Section 2.3 Effect of the Merger 2
Section 2.4 Certificate of Incorporation; Bylaws. 3
Section 2.5 Directors and Officers 3
Section 2.6 Effect on Capital Stock 3
Section 2.7 No Further Ownership Rights in the Company Capital Stock 4
Section 2.8 Tax Consequences 4
Section 2.9 Withholding Rights 4
Section 2.10 Taking of Necessary Action; Further Action 4
Section 2.11 Restricted Securities 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS 5
Section 3.1 Organization, Standing and Power 5
Section 3.2 Capital Structure 6
Section 3.3 Authority; No Conflicts or Consents 7
Section 3.4 Financial Statements; Liabilities 8
Section 3.5 Absence of Certain Changes 9
Section 3.6 Absence of Undisclosed Liabilities 9
Section 3.7 Litigation 9
Section 3.8 Governmental Authorization 9
Section 3.9 Title to Personal Property 10
Section 3.10 Intellectual Property 10
Section 3.11 Company Products and FDA Matters 12
Section 3.12 Compliance With Laws 13
Section 3.13 Environmental Matters 13
Section 3.14 Taxes 15
Section 3.15 Employee Benefit Plans 16
Section 3.16 Certain Agreements Affected by the Merger 18
Section 3.17 Employee Matters 18
Section 3.18 Insurance 19
Section 3.19 Customers and Suppliers 20
Section 3.20 Material Contracts 20
Section 3.21 No Breach of Material Contracts 21
Section 3.22 Real Property and Real Property Leases 21
Section 3.23 Certain Business Practices 23
Section 3.24 Interested-Party Transactions 24
Section 3.25 Information Supplied 24
Section 3.26 Brokers' and Finders' Fees 24
Section 3.27 Vote Required 24
Section 3.28 Board Approval 24
Section 3.29 Reorganization Matters 25
Section 3.30 No Opinion of Financial Advisor 25
Section 3.31 Investigation by the Company and the Stockholders 25
Section 3.32 Company Disclosure Schedule 25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB 25
Section 4.1 Organization, Standing and Power 25
Section 4.2 Capital Structure 26
Section 4.3 Authority 27
Section 4.4 SEC Documents; Financial Statements 28
Section 4.5 Absence of Undisclosed Liabilities 28
Section 4.6 Litigation 29
Section 4.7 Reorganization Matters 29
Section 4.8 Brokers' and Finders' Fees 29
Section 4.9 Board Approval 29
Section 4.10 Investigation by Parent 29
Section 4.11 Absence of Certain Changes 30
Section 4.12 Information Supplied 30
Section 4.13 Parent Disclosure Schedule 30
ARTICLE V. CONDUCT PRIOR TO THE EFFECTIVE TIME 30
Section 5.1 Conduct of Business 30
Section 5.2 Restriction on Conduct of Business of the Company 31
Section 5.3 No Solicitation 32
ARTICLE VI. ADDITIONAL AGREEMENTS 33
Section 6.1 Access to Information; Disclosure Schedule Updates 33
Section 6.2 No Dissenters' Rights 34
Section 6.3 Confidentiality 34
Section 6.4 Public Disclosure 34
Section 6.5 Consents; Cooperation 34
Section 6.6 Legal Requirements 35
Section 6.7 Treatment as Reorganization 35
Section 6.8 Listing of Additional Shares 35
Section 6.9 Location of Arius 35
Section 6.10 Financing of the Surviving Corporation 35
Section 6.11 Atrix License Payment 35
Section 6.12 Board Observation and Nomination Rights 36
Section 6.13 Non-Competition 36
Section 6.14 Certain Stockholder Approval 37
Section 6.15 Further Assurances 37
ARTICLE VII. CONDITIONS TO THE MERGER 37
Section 7.1 Conditions to Obligations of Each Party to Effect the Merger 37
Section 7.2 Additional Conditions to Obligations of the
Company and the Stockholders 38
Section 7.3 Additional Conditions to the Obligations of Parent 39
ARTICLE VIII. TERMINATION 41
Section 8.1 Termination 41
Section 8.2 Effect of Termination 42
Section 8.3 Expenses 42
ARTICLE IX. SURVIVAL; INDEMNIFICATION 43
Section 9.1 Survival 43
Section 9.2 Obligation of the Company and the Stockholders to Indemnify 43
Section 9.3 Obligation of Parent to Indemnify 43
Section 9.4 Limitations on Liability 44
Section 9.5 Notice and Opportunity to Defend 44
ARTICLE X. GENERAL PROVISIONS 45
Section 10.1 Amendment 45
Section 10.2 Extension; Waiver 45
Section 10.3 Notices 45
Section 10.4 Certain Interpretive Conventions 46
Section 10.5 Entire Agreement 47
Section 10.6 Severability 47
Section 10.7 Remedies Cumulative 48
Section 10.8 Governing Law; Waiver of Jury Trial 48
Section 10.9 Attorneys' Fees 48
Section 10.10 Rules of Construction 48
Section 10.11 Assignment 48
Section 10.12 Successors and Assigns 48
Section 10.13 Counterparts; Facsimile Delivery 48
SCHEDULES AND EXHIBITS
Schedule A Defined Terms
Exhibit A Form of Certificate of Merger
Exhibit B Form of Certificate of Designations of Parent Preferred Stock
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Employment Agreement
Exhibit E Form of Legal Opinion of Ellenoff Xxxxxxxx & Schole LLP
Exhibit F Form of Legal Opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
Exhibit G Form of Parent Stockholder Voting Agreements
Exhibit H Form of Stockholder Voting Agreements
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "AGREEMENT") is
made as of August 10, 2004 (the "EXECUTION DATE") by and among BioDelivery
Sciences International, Inc., a Delaware corporation ("PARENT"), Arius
Acquisition Corp, a Delaware corporation and a wholly-owned subsidiary of Parent
("MERGER SUB") and Arius Pharmaceuticals, Inc., a Delaware corporation (the
"COMPANY"), Xxxx X. Xxxxx ("XXXXX") and Xxxxxx X. Xxxx ("XXXX" and, collectively
with Xxxxx, the "STOCKHOLDERS").
RECITALS
WHEREAS, Xxxxx and Xxxx each hold 49.54% of the outstanding shares of
Company Common Stock as of the Execution Date;
WHEREAS, Merger Sub is a wholly-owned subsidiary of Parent formed solely
for the purpose of engaging in the Merger;
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
each have determined that the business combination between Parent and the
Company through the merger of the Company with and into Merger Sub pursuant to
the terms and subject to the conditions set forth herein (the "MERGER") is
advisable and in the best interests of their respective companies and
stockholders;
WHEREAS, pursuant to the Merger, among other things: (i) the aggregate
shares of Company Common Stock outstanding as of the Effective Time shall be
converted into the right to receive an aggregate of 1,647,059 shares of Parent
Preferred Stock and (ii) each outstanding share of common stock of Merger Sub
shall remain issued and outstanding as a share of common stock of the Surviving
Corporation (as hereinafter defined);
WHEREAS, the Company, the Stockholders and Parent desire to make certain
representations, warranties, covenants and other agreements in connection with
the Merger; and
WHEREAS, the parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "CODE"), and to cause the Merger to qualify as a
tax-deferred reorganization under the provisions of Sections 368(a) of the Code.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by all parties, the parties hereto
agree as follows:
ARTICLE I .
DEFINITIONS
Section 1.1 Defined Terms. Certain capitalized terms used in this
Agreement are defined on Schedule A hereto. Other capitalized terms are defined
elsewhere herein.
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ARTICLE II THE MERGER
Section 2.1 The Merger. Subject to and in accordance with the terms and
conditions set forth in this Agreement, at the Effective Time (as defined
below), the Company shall be merged with and into Merger Sub, which shall be the
surviving corporation in the Merger ("SURVIVING CORPORATION"), and the separate
existence of the Company shall thereupon cease. The name of Surviving
Corporation shall be "Arius Pharmaceuticals, Inc." The Merger shall have the
effects set forth in the applicable provisions of the Delaware General
Corporation Law ("DELAWARE LAW").
Section 2.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "CLOSING") shall take place as soon as practicable and
in any event not later than two (2) business days after the satisfaction or
waiver of each of the conditions set forth in Article VII hereof or at such
other time as the parties hereto agree (the "CLOSING DATE"). The Closing shall
take place at the offices of Ellenoff Xxxxxxxx & Schole LLP, 370 Lexington
Avenue, New York, New York, or at such other location as the parties hereto
agree. In connection with the Closing, the parties hereto shall cause the Merger
to be consummated by filing the Certificate of Merger, in substantially the form
attached hereto as Exhibit A (the "CERTIFICATE OF MERGER"), together with any
required officers' certificates, with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of Delaware Law (the time
of such filing with the Secretary of State of Delaware, the ("EFFECTIVE TIME").
Section 2.3 Effect of the Merger.
(a) At the Effective Time, the effect of the Merger shall be as provided
in this Agreement, the Certificate of Merger, and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company (including, without limitation, all rights to the
Company Intellectual Property) and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
(b) It is specifically understood and agreed by the parties that:
(i) the accrued legal fees of the Company will be assumed and paid
by the Surviving Corporation; and
(ii) notwithstanding the provisions of Section 2.3(a) to the
contrary, that portion of the pre-Closing Date debt of the Company representing
accrued salaries as of the Execution Date shall be formally extinguished in
writing effective as of the Execution Date by the beneficiaries thereof on the
Books and Records of the Company and shall not be assumed by the Surviving
Corporation.
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Section 2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter further amended as provided by Delaware Law.
(b) At the Effective Time, the Bylaws of Merger Sub shall be the Bylaws of
the Surviving Corporation until thereafter further amended as provided by
Delaware Law and such Bylaws.
Section 2.5 Directors and Officers. At the Effective Time: (i) the
existing directors and officers of the Company shall resign their positions in
writing, (ii) the directors of Merger Sub shall become the directors of
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified, and (ii) the officers of Merger Sub shall hold the
offices of President, Vice President, Secretary and Treasurer, respectively, of
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
Section 2.6 Effect on Capital Stock.
(a) Conversion of the Company Capital Stock. By virtue of the Merger and
without any further action on the part of Parent, the Company, Merger Sub or any
of their respective stockholders, at the Effective Time, each share of the
Company Common Stock issued and outstanding immediately prior to the Effective
Time, but excluding any shares cancelled pursuant to Section 2.6(c), will be
automatically cancelled, extinguished and converted, at the Closing, into the
right to receive a number of shares of Parent Preferred Stock equal to the
quotient of: (i) 1,647,059 divided by (ii) the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time.
(b) Cancellation of the Company Capital Stock Owned by the Company. At the
Effective Time, all shares of the Company Capital Stock that are owned by the
Company as treasury stock shall be cancelled and extinguished without any rights
to conversion thereof and no consideration shall be delivered in exchange
therefore.
(c) Treatment of the Company Option Plans and the Company Options Rights.
At the Effective Time, the Company Stock Option Plans and all the Company
Options then outstanding under the Company Stock Option Plans shall be cancelled
and of no further force and effect. All Company Options shall either be
exercised prior to the Effective Time or shall be terminated and of no further
force and effect following the Effective Time in accordance with this Section
2.6(c). The Company covenants that there will be no shares of Company Capital
Stock authorized or issued as of the Effective Time other than shares of Company
Common Stock.
(d) Adjustments. If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding capital stock of
Parent shall occur, including by reason of any reclassification,
recapitalization, stock dividend, stock split, or combination, exchange or
readjustment of shares of capital stock of Parent, or any stock dividend thereof
(but excluding any issuance of any shares of capital stock of Parent or
securities convertible into any shares of capital stock of Parent, including:
(i) any issuances pursuant to the Parent Stock Option Plan and (ii) any
exercises of Parent Options or Parent Warrants), the shares of the Parent
Preferred Stock to be received by the Stockholders shall be appropriately
adjusted.
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(e) No Fractional Shares. No fraction of a share of Parent Preferred Stock
will be issued in connection with the Merger. Each fraction of a share of Parent
Preferred Stock shall be rounded to the nearest whole number.
(f) Capital Stock of Merger Sub. At the Effective Time, each share of
common stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) validly issued,
fully paid and non-assessable share of common stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of Common Stock
of the Surviving Corporation.
Section 2.7 No Further Ownership Rights in the Company Capital Stock. All
shares of Parent Preferred Stock issued upon the surrender for exchange of
shares of the Company Capital Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of the Company Capital Stock, and after the Effective Time there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of the Company Capital Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates are presented
to the Surviving Corporation for any reason, they shall be exchanged and
cancelled as provided in this Article II.
Section 2.8 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a tax-deferred reorganization within the meaning of
Section 368 of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
Section 2.9 Withholding Rights. Parent and the Surviving Corporation shall
be entitled to deduct and withhold from the number of shares of Parent Preferred
Stock otherwise deliverable under this Agreement, and from any other payments
made pursuant to this Agreement, such amounts as Parent and the Surviving
Corporation are required to deduct and withhold with respect to such delivery
and payment under the Code or any provision of state, local, provincial or
foreign tax Law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
delivered and paid to the Stockholders and the other holders of shares of the
Company Capital Stock in respect of which such deduction and withholding was
made by Parent and the Surviving Corporation.
Section 2.10 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
all right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and its assets (including, without
limitation, all rights to the Company Intellectual Property), the officers and
directors of the Company, Parent and the Surviving Corporation are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.
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Section 2.11 Restricted Securities. The shares of Parent Preferred Stock
to be issued pursuant to Section 2.6(a) hereof (and the shares of Parent Common
Stock underlying such shares of Parent Preferred Stock) shall be restricted
securities within the meaning of the Securities Act, will not have been
registered with the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Act and may not be sold or transferred absent such registration
or unless an exception from registration is available. The certificates
evidencing such shares of Parent Preferred Stock shall bear a legend
substantially in the following form, in addition to any other legends required
by applicable state Law:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO: (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO
THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III)
AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE."
Upon the written request from a holder thereof, Parent shall remove the
restrictive legend from the shares of Parent Common Stock underlying the Parent
Preferred Stock (when and if issued), which request shall be accompanied by an
opinion of counsel, reasonably acceptable to Parent, to the effect that the
holders thereof are entitled to have such legend removed pursuant to the
provisions of the Securities Act and Rule 144 promulgated thereunder. Parent's
obligation to remove such legend shall be conditioned upon the receipt of such
legal opinion. Parent shall have no obligation to remove any restrictive legends
from the shares of Parent Preferred Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS
Except as disclosed in the Company Disclosure Schedule or as specifically
provided for in this Article III, the Company and the Stockholders, jointly and
severally, represent and warrant to Parent and Surviving Corporation as follows:
Section 3.1 Organization, Standing and Power. Each of the Company and its
corporate Affiliates is a corporation duly organized, validly existing and in
good standing under the Laws of its jurisdiction of organization. The Company
has the corporate power to own its properties and to carry on its business as
now being conducted and as currently proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and to be in good standing would have a Company
Material Adverse Effect. The Company has delivered or made available a true and
correct copy of the Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of the Company and each of its corporate Affiliates,
each as amended to the execution of this Agreement, to Parent. The Company is
not in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent organizational documents. The Company has no subsidiaries.
The Company does not directly or indirectly own any equity or similar interest
in, or any interest convertible or exchangeable or exercisable for, any equity
or similar interest in, any non-individual Person.
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Section 3.2 Capital Structure.
(a) The authorized capital stock of the Company consists of 1,000,000
shares of Company Common Stock, of which there were 504,688 shares issued and
outstanding as of the close of business on the Execution Date. No shares of
preferred stock are authorized for issuance by the Company. Except as set forth
on Schedule 3.2(a) to the Company Disclosure Schedule, on the Execution Date
there are, and as of the Effective Time there will be, no outstanding
commitments to issue any shares of Company Capital Stock. Schedule 3.2(a) to the
Company Disclosure Schedule lists all of the stockholders of the Company and all
of the holders of Company Options or Company Convertible Securities (and the
shares of Company Common Stock issuable under such Company Options or Company
Convertible Securities).
(b) All outstanding shares of the Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
Liens, other than any Liens created by or imposed upon the holders thereof, and
are not subject to preemptive rights or rights of first refusal created by
Delaware Law, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which it is bound. All
outstanding shares of the Company Capital Stock were issued in compliance in all
material respects with all applicable federal and state securities Laws. Except
as set forth on Schedule 3.2(b) to the Company Disclosure Schedule and except
for the rights created pursuant to this Agreement and for all Company Options
(which shall be accelerated and exercised into shares of Company Common Stock
pursuant to the terms of this Agreement), as of the Execution Date there are no,
and as of the Effective Time, there will be no, other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the Company Capital Stock or obligating the Company to
grant, extend, accelerate the vesting of, change the price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment or
agreement. Except for the agreements contemplated by this Agreement and the
agreements set forth on Schedule 3.2(b) to the Company Disclosure Schedule,
there are no contracts, commitments or agreements relating to voting, purchase
or sale of the Company Capital Stock: (i) between or among the Company and any
of its security holders and (ii) between or among any of the Company's security
holders, including the Stockholders.
(c) Except as set forth on Schedule 3.2(c) to the Company Disclosure
Schedule, none of the outstanding Company Options, Company Convertible
Securities or the Company Notes, nor any employment or consulting agreements by
and between the Company and others provide for any accelerated vesting or
exercisability of those options, securities or notes, as applicable, by reason
of the Merger or any other transactions contemplated by this Agreement. True and
complete copies of all agreements and instruments relating to or issued under
the Company Stock Option Plans, the Company Options or otherwise relating to the
issuance of the Company Options, the Company Convertible Securities and the
Company Notes, have been provided or made available to Parent and such
agreements and instruments have not been amended, modified or supplemented, and,
except as otherwise expressly contemplated herein or as otherwise disclosed on
Schedule 3.2(c) to the Company Disclosure Schedule, there are no agreements to
amend, modify or supplement such agreements or instruments in any case from the
forms provided to Parent.
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Section 3.3 Authority; No Conflicts or Consents.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, including approval by the
Stockholders and any other Person.
(b) This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company enforceable against
the Company by Parent and Merger Sub in accordance with its terms. The execution
and delivery of this Agreement by the Company does not, and the execution of the
other agreements contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in any violation of, or default under (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of any benefit under: (i) any provision of the
Certificate of Incorporation or Bylaws of the Company, (ii) any the Company
Authorization (as defined in Section 3.8) or (ii) any Material Contract.
(c) Except as set forth on Schedule 3.3(c) to the Company Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any foreign, federal, state or local court,
administrative agency or commission or other governmental authority or
instrumentality (each, a "GOVERNMENTAL ENTITY") is required with respect to the
Company in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for: (i) the
filings of the Certificate of Merger, together with the required officers'
certificates, (ii) any notice described in Section 6.16 hereof and (iii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.
(d) Except as set forth on Schedule 3.3(d) to the Company Disclosure Schedule,
neither the Company, the Stockholders nor their respective Affiliates is subject
to or bound by any provision of:
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(i) any Law;
(ii) any contract, mortgage, deed of trust, lease, note, agreement,
understanding, proxy, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship or other restriction, or
(iii) any consent, judgment, order, writ, award, injunction or
decree of any Governmental Authority or arbitrator,
that would conflict with, prevent or be violated by or that would result in the
creation of any Lien as a result of, or under which there would be a default or
right of termination, amendment, acceleration, revocation, cancellation or
suspension as a result of, the execution, delivery and performance by the
Company or the Stockholders of this Agreement, any other document contemplated
hereby, including all agreements and instruments which are Exhibits hereto
(each, an "OTHER DOCUMENT"), the consummation of the Merger or the other
transactions contemplated hereby or thereby. Except as set forth on Schedule
3.3(d) to the Company Disclosure Schedule, no consent, novation, order, license,
permit, approval or authorization of or declaration, notice or filing with any
Person is required for: (i) the valid execution, delivery and performance by the
Company and the Stockholders of this Agreement or any Other Document and the
consummation of the Merger or the other transactions contemplated hereby and
thereby or (ii) the ability of Parent to operate the Company's business in
substantially and materially the same manner as the business was operated by the
Company prior to the Effective Time.
Section 3.4 Financial Statements; Liabilities.
(a) The Company was formed on April 22, 2003. The Company has heretofore
furnished Parent with copies of the following financial statements of the
Company: (i) balance sheet as at December 31, 2003; (ii) statements of
operations for the year ended on December 31, 2003; (iii) a balance sheet (the
"REFERENCE BALANCE SHEET") as at July 31, 2004 (the "REFERENCE BALANCE SHEET
DATE"); and (iv) a statement of operations (the "REFERENCE INCOME STATEMENT")
for the seven months ended July 31, 2004. Except as set forth on Schedule 3.4(a)
to the Company Disclosure Schedule, all such financial statements are complete
and correct in all material respects, were prepared in accordance with generally
accepted accounting principles of the United States ("GAAP"), consistently
applied throughout the periods indicated, and have been prepared in accordance
with the Books and Records of the Company, and present fairly the financial
position of the Company at such dates and the results of its operations and cash
flows for the periods then ended, subject to normal year end adjustments made in
accordance with GAAP and to such inaccuracies, if any, which are not material in
nature or amount. The financial statements of the Company provided to Parent
pursuant to this Section 3.4(a) are referred to herein as the "COMPANY FINANCIAL
STATEMENTS."
(b) To the Company's knowledge, there are no Liabilities of or against the
Company of any nature (accrued, absolute or contingent, unasserted or
otherwise), except: (i) as and to the extent reflected or reserved against on
the Reference Balance Sheet; (ii) as set forth on Schedule 3.4(b) to the Company
Disclosure Schedule; (iii) those that are individually, or in the aggregate, not
material to the Company; or (iv) open purchase or sales orders or agreements for
delivery of goods and services in the ordinary course of business consistent
with prior practice.
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Section 3.5 Absence of Certain Changes. Except as set forth on Schedule
3.5 to the Company Disclosure Schedule or as expressly contemplated by this
Agreement, since the Reference Balance Sheet Date there has not occurred: (i)
any change, event or condition (whether or not covered by insurance or similar
indemnification agreement) that has resulted in, or would reasonably be expected
to result in, a Company Material Adverse Effect, (ii) any acquisition, sale or
transfer of any material asset of the Company or any of its Affiliates, (iii)
any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company or any
revaluation by the Company of any of its or any of its Affiliates' assets, (iv)
any declaration, setting aside, or payment of a dividend or other distribution
with respect to the shares of the Company, or any direct or indirect redemption,
purchase or other acquisition by the Company of the Company Capital Stock, (v)
any action to amend or change the Certificate of Incorporation or Bylaws of the
Company (nor will there be prior to the Effective Time) or (vi) any negotiation
or agreement by the Company or any of its Affiliates to do any of the things
described in the preceding clauses (i) through (v) (other than negotiations with
Parent and its representatives regarding the transactions contemplated by this
Agreement).
Section 3.6 Absence of Undisclosed Liabilities. To the Company's
knowledge, and except as set forth on Schedule 3.6 to the Company Disclosure
Schedule, the Company has no material Liabilities of any nature (matured or
unmatured, fixed or contingent) other than: (i) those set forth or adequately
reflected or reserved against on the Reference Balance Sheet, (ii) those
incurred in the ordinary course of business since the Reference Balance Sheet
Date, (iii) those incurred in connection with the execution of this Agreement,
and (iv) those disclosed on Schedule 3.7 to the Company Disclosure Schedule.
Section 3.7 Litigation. Except as set forth on Schedule 3.7 to the Company
Disclosure Schedule, there is no civil or criminal, private or governmental
action, suit, proceeding, claim, arbitration, governmental investigation, or to
the knowledge of the Company, any governmental or private regulatory activity or
investigation pending before or being undertaken by any agency, court or
tribunal, foreign or domestic (each a "PROCEEDING") against the Company, any of
its Affiliates, the Stockholders or any of their respective properties or any of
their respective officers or directors (in their capacities as such). To the
knowledge of the Company, no Proceeding is being threatened against the Company,
any of its Affiliates, the Stockholders or any of their respective properties or
any of their respective officers or directors (in their capacities as such).
There is no Proceeding, judgment, decree or order against the Company or any of
its Affiliates (including the Stockholders), or, to the knowledge of the
Company, or any of its Affiliates (including the Stockholders), or any of their
respective directors or officers (in their capacities as such), that could
prevent, enjoin, or materially alter or delay the Merger or any of the other
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Company Material Adverse Effect.
Section 3.8 Governmental Authorization. The Stockholders and the Company
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization of a Governmental
Entity: (i) pursuant to which the Company currently operates or holds any
interest in any of its properties or (ii) that is required for the operation of
the Company's business as currently conducted or the holding of any such
interest ((i) and (ii) herein collectively called the "COMPANY AUTHORIZATIONS"),
and all of such the Company Authorizations are in full force and effect, except
where the failure to obtain or have any such the Company Authorizations could
not reasonably be expected to have a Company Material Adverse Effect.
9
Section 3.9 Title to Personal Property. Except as set forth on Schedule
3.9 to the Company Disclosure Schedule, the Company has good, valid and
marketable title to all of its personal property, interests in personal
properties and material assets reflected in the Reference Balance Sheet or
acquired after the Reference Balance Sheet Date. Such properties and assets with
a book value of $10,000 or above are listed on Schedule 3.9 to the Company
Disclosure Schedule (except properties, interests in properties and assets sold
or otherwise disposed of since the Company Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests, free and clear of all Liens, except: (i) a lien for current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which are reflected on the Reference Balance Sheet, and (iv) liens
that in the aggregate would not have a Company Material Adverse Effect. To the
Company's knowledge, the plants, property and equipment of the Company that are
used in the operations of its business are in good operating condition and
repair, subject to normal wear and tear. All personal properties used in the
operations of the Company are reflected in the Reference Balance Sheet to the
extent GAAP requires the same to be reflected.
Section 3.10 Intellectual Property.
(a) Set forth on Schedule 3.10(a)(i) to the Company Disclosure Schedule is
a true, accurate and complete list of all Intellectual Property directly or
indirectly owned, licensed, optioned or otherwise used or proposed to be used by
the Company or its Affiliates in its business and by the Stockholders in
connection with the business of the Company (collectively, the "COMPANY
INTELLECTUAL PROPERTY"). Set forth on Schedule 3.10(a)(ii) to the Company
Disclosure Schedule is a true, accurate and complete list of all grant, license,
acquisition, purchase, assignment, option, product development, evaluation,
confidentiality, non-disclosure, marketing and similar agreements, instruments
or arrangements (and any letters of intent relating to any potential agreement)
(collectively, the "COMPANY IP AGREEMENTS") to which the Company, its Affiliates
or the Stockholders is a party relating or pertaining to the Company
Intellectual Property.
(b) The Company either: (i) owns and is listed in the records of the
appropriate United States, state or foreign registry as the current owner of
record for each application and registration of Company Intellectual Property or
(ii) has a legally enforceable license or other valid and lawful rights to use
(in each case, free and clear of any Liens, except for Liens contained in the
Company IP Agreements or Liens which do not directly encumber the Company or its
assets) all Company Intellectual Property used in or necessary for the conduct
of its business as currently conducted, including without limitation all patents
and patent applications and all trademark registrations and trademark
applications.
10
(c) To the Company's knowledge, and except as set forth on Schedule
3.10(f) to the Company Disclosure Schedule, the conduct of the business of the
Company as currently conducted does not infringe on or misappropriate, either
directly or indirectly (such as through contributory infringement or inducement
to infringe), the Intellectual Property rights of any Person, and the use by the
Company of any Company Intellectual Property is in accordance with the
applicable Company IP Agreement.
(d) To the Company's knowledge, and except as set forth on Schedule
3.10(f) to the Company Disclosure Schedule, no Person is misappropriating,
infringing, diluting or otherwise violating any right of the Company with
respect to any Company Intellectual Property owned or used by the Company, and
no such claims, suits, arbitrations or other adversarial proceedings have been
brought or threatened against any Person by the Company or any of its Affiliates
or the Stockholders.
(e) Except as set forth on Schedule 3.10(e) to the Company Disclosure
Schedule, neither Company nor any of its Affiliates or the Stockholders have
received any written or other notice by any Person of any pending or threatened
claim, suit, action, mediation, arbitration, order or other adversarial
proceeding: (i) alleging infringement (or other violation) by the Company or any
of its Affiliates or the Stockholders of Intellectual Property or other rights
of any Person or (ii) challenging the Company's or its Affiliates or the
Stockholders' ownership or use of, or the validity, enforcement, registrability
or maintenance of, any Company Intellectual Property owned or used by the
Company, its Affiliates or the Stockholders. No Company Intellectual Property
owned or used by the Company or any of its Affiliates is being used or enforced
in a manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Company Intellectual Property.
(f) Except as set forth on Schedule 3.10(f) to the Company Disclosure
Schedule, the Company Intellectual Property owned or used by the Company or its
Affiliates: (i) is being owned or used by the Company in accordance with, and
not in breach of any, all Company IP Agreements, (ii) has been duly maintained,
(iii) is subsisting, in full force and effect, (iv) is, to the Company's
knowledge, valid and enforceable, (v) has not expired, been cancelled or
abandoned and (vi) all maintenance, registration and renewal fees necessary to
preserve the rights of the Company in connection with such Company Intellectual
Property which are required to be paid by the Company or, to the Company's
knowledge, any other Person, have been paid in a timely manner, and (vi) except
as set forth on Schedule 3.10(f) to the Company Disclosure Schedule, there are
no actions that must be taken by the Company, its Affiliates or the Stockholders
within ninety (90) days of the Execution Date, including the payment of any
registration, maintenance or renewal fees or the filing with the United States
Patent and Trademark Office or such other appropriate U.S. or foreign office or
similar administrative agency of documents, applications or certificates for the
purposes of obtaining, maintaining, perfecting, preserving or renewing any
rights in the registered or applied-for Company Intellectual Property.
(g) Except as provided for in the Company IP Agreements, neither the
Company, its Affiliates or the Stockholders has entered into any consents,
judgments, orders, indemnifications, forbearances to xxx, settlement agreements,
licenses or other arrangements which: (i) restrict the Company's or its
Affiliates or the Stockholders' right to use any Company Intellectual Property,
(ii) restrict the business of the Company's or its Affiliates in order to
accommodate a third Person's Intellectual Property rights, (iii) permit third
parties to use any Company Intellectual Property, (iv) reasonably would be
expected to provide any third party a defense to patent infringement in
connection with any Company Intellectual Property.
11
(h) All Company Intellectual Property developed by and belonging to the
Company or its Affiliates which has not been patented has been kept confidential
so as, among other things, all such information may be deemed proprietary to the
Company. Each Person (including any current and former employee of or consultant
to the Company) who has contributed to or participated in research and
development activities of the Company will not, after giving effect to the
Merger and the other transactions contemplated by this Agreement, own or retain
any rights to use any of the Company Intellectual Property. Except for such
rights as are specifically provided for in the Company IP Agreements, neither
the Company nor its Affiliates has granted or assigned to any other Person any
right to manufacture, have manufactured, assemble or sell the current products
and services of the Company.
Section 3.11 Company Products and FDA Matters.
(a) Schedule 3.11(a) to the Company Disclosure Schedule sets forth a
complete and accurate listing and description of: (i) any and all products
designed, developed, licensed, manufactured, sold, promoted, labeled or
distributed by, or on behalf of, the Company, including any proposed products
which are under active pre-clinical or clinical development as of the Execution
Date (collectively, the "COMPANY PRODUCTS") and (ii) a brief description of all:
(A) active pre-clinical activities, including laboratory studies, (B) clinical
testing and laboratory studies and (C) any other material activities being
undertaken or proposed to be undertaken by the Company or any other Person with
respect to each Company Product, in each case as of the Execution Date (the
"DEVELOPMENT ACTIVITIES").
(b) Except as set forth on Schedule 3.11(b) to the Company Disclosure
Schedule, the Company has no: (i) approvals for the operation of its business as
currently conducted or (ii) clearances, authorizations, licenses and
registrations required by any foreign or domestic Governmental Entity
(including, without limitation, the U.S. Food and Drug Administration (the
"FDA")), to permit the design, development, pre-clinical and clinical testing,
manufacture, labeling, sale, distribution and promotion of the Company Products.
The approvals and authorizations listed on Schedule 3.11(b) to the Company
Disclosure Schedule are those which are required to operate the Company's
business as currently conducted.
(c) Except as set forth on Schedule 3.11(c) to the Company Disclosure
Schedule, neither the Company nor its Affiliates (including the Stockholders)
has received any data or other information which would have a Company Material
Adverse Effect.
(d) The Company is and, to the Company's knowledge, its designated
manufacturers in connection with the Development Activities are, in compliance
in all material respects with all applicable terms and conditions of each Law
pertaining to the design, development, pre-clinical and clinical testing,
manufacture, labeling, sale, distribution and promotion of the Company Products
(including, without limitation, all Laws administered by the FDA).
12
(e) The Company is and, to the Company's knowledge, its designated
manufacturers in connection with the Development Activities are, in compliance
in all material respects with all applicable Laws regarding registration,
license, certification for each site at which a Company Product is manufactured,
labeled, sold or distributed.
(f) To the extent any Company Product has been exported by the Company or
Persons with whom the Company is in privity of contract from the United States,
the Company has and, to the Company's knowledge, such other Persons have
exported such Company Products in compliance in all material respects with all
applicable Laws.
(g) The Company does not directly manufacture any Company Product or any
component part thereof. With respect to all manufacturing or related operations
undertaken by Persons with whom the Company is in privity of contract relating
to any Company Product, to the Company's knowledge such operations have been and
are being conducted in all material respects in compliance with applicable
current good manufacturing practices and regulations issued by the FDA and, to
the extent applicable, counterpart regulations in the European Union and all
other countries where compliance is required.
(h) To the Company's knowledge, all Development Activities sponsored by or
involving the Company (whether undertaken by the Company or other Persons)
relating to any Company Product and intended to be used to support regulatory
clearance or approval have been and are being conducted: (i) to the extent
applicable, in compliance in all material respects with the current good
laboratory practice regulations of Governmental Entities in the United States
and (ii) to the extent applicable, counterpart regulations in the European Union
and all other countries.
(i) To the knowledge of the Company, no filing or submission to the FDA or
any other Governmental Entity with regard to the Company Products that is the
basis for any approval or clearance contains any material omission or materially
false information.
(j) The Company has not received any formal written notice or other
written communication from the FDA or any other Governmental Entity: (i)
rejecting or overtly contesting the pre-market clearance or approval of, the
uses of or the labeling and promotion of any of the Company Products or (ii)
otherwise alleging any violation of any Laws by the Company or the Stockholders
in connection with the Company.
Section 3.12 Compliance With Laws. The Company and the Stockholders in
connection with the Company have complied with, are not in violation of, and
have not received any notices of violation with respect to any Law with respect
to the ownership, operation or conduct of the Company's business, except for
such violations or failures to comply as could not be reasonably expected to
have a Company Material Adverse Effect.
Section 3.13 Environmental Matters. Except as disclosed on Schedule 3.13
to the Company Disclosure Schedule:
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(a) To the knowledge of the Company, the operations of the Company (and
the actions of the Stockholders in connection therewith) has at all times been
and are in full compliance with all Environmental Laws. To the knowledge of the
Company, the Company has obtained and is in full compliance with all
Environmental Approvals, and each such Environmental Approval is in full force
and effect, and each such Environmental Approval will remain in full force and
effect after the execution, delivery and performance of this Agreement, provided
any transfer documents required by Environmental Law for such Environmental
Approval are completed as required by Environmental Law.
(b) Neither the Company nor any of its Property or Facilities is subject
to any order or proposed order under any Environmental Law. The Company has not
received any notice from any Person or Governmental Entity regarding or
alleging, and, to the knowledge of the Company, no condition or circumstance
exists that is reasonably likely to result in (with or without notice or lapse
of time or both) a violation or failure to comply with any term or requirement
of any Environmental Law or Environmental Approval.
(c) There are no Proceedings (whether adjudicatory, rulemaking, licensing
or otherwise) pending or, to the knowledge of the Company, threatened in law or
in equity, or under any administrative or regulatory authority before any
Governmental Entity, by, against or affecting the Company or any of its Property
or Facilities involving any actual or alleged Environmental Claim or any
potential suspension, revocation, revision, limitation, restriction, termination
or invalidation of any Environmental Approval. The Company has not received any
notice or other communication (whether written or oral) from any person or
Governmental Entity, and no condition or circumstance exists, that (with or
without notice or lapse of time or both) might directly or indirectly give rise
to, or serve as a basis for, the commencement of any such Proceeding.
(d) To the knowledge of the Company, the Company has not Released or
threatened to Release, or arranged for any other person to Release, any
Hazardous Material in connection with or resulting from the operation or conduct
of the Company's business at, on, under, from or to any Property or Facilities,
or any other location, except in each case: (i) in full compliance with
Environmental Law, (ii) in a manner that would not give rise to any
Environmental Claim and (iii) at a location that (A) is fully permitted for such
Release, (B) has not been listed or proposed for listing on the National
Priorities List under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss. 9601 et seq. ("CERCLA"), or any similar
list under any other Environmental Law and (C) is not subject to any Proceeding
or Order for investigation or cleanup under any Environmental Law. To the
knowledge of the Company, no Release or threatened Release of any Hazardous
Material has occurred, or is occurring, at, on, under, from or to any Property
or Facilities, and, to the knowledge of the Company, no Hazardous Material is
present in, on, under or about, or migrating to or from any such Property or
Facilities that could give rise to any Environmental Claim or cause of action.
Neither the Company nor the Stockholders in connection with the Company is a
potentially responsible party under CERCLA, or state analog statute, arising out
of events occurring prior to the Closing Date.
14
(e) There are no Liens, declarations or deed restrictions that have arisen
or been imposed pursuant to any Environmental Law on any Property or Facilities,
and no action of any Governmental Entity has been taken or, to the knowledge of
the Company, is in process which could subject any of such Property or
Facilities to such Liens, declarations or deed restrictions.
(f) To the knowledge of the Company, none of the following exists at any
Property or Facilities: any asbestos-containing material in any form which is
friable; urea formaldehyde foam insulation; polychlorinated biphenyls; active or
out-of-service or underground storage tanks or sites from which such storage
tanks have been removed; or landfills, surface impoundments, waste piles or land
disposal areas.
Section 3.14 Taxes. Except as disclosed on Schedule 3.14 to the Company
Disclosure Schedule:
(a) The Company has timely filed all Tax Returns (as defined below) that
it was required to file, and such Tax Returns are true, correct and complete in
all material respects. All Taxes (as defined below) shown to be payable on such
Tax Returns or on subsequent assessments with respect thereto have been paid in
full on a timely basis, and no other Taxes are payable by the Company or any
subsidiary with respect to any period ending prior to the date of this
Agreement, whether or not shown due or reportable on such Tax Returns, other
than Taxes for which adequate accruals have been provided and are reflected in
the Company Financial Statements or amounts payable with respect to periods or
portions of periods after the Company Balance Sheet Date. The Company has
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto. Neither the
Company nor any subsidiary has any material liability for unpaid Taxes accruing
after the date of its Reference Balance Sheet Date, except for Taxes incurred in
the ordinary course of business. There are no Liens for Taxes on the properties
of the Company.
(b) No Tax Returns of the Company have been audited. The Company has
delivered or made available to Parent correct and complete copies of all Tax
Returns filed, examination reports, and statements of deficiencies assessed or
agreed to by the Company since inception. The Company has not waived any statute
of limitations in respect of any Tax or agreed to an extension of time with
respect to any Tax assessment or deficiency.
(c) Neither the Company nor the Stockholders in connection with the
Company is a party to or bound by any tax indemnity agreement, tax sharing
agreement or similar contract. Neither the Company nor the Stockholders is a
party to any joint venture, partnership, or other arrangement or contract which
could be treated as a partnership or "disregarded entity" for United States
federal income tax purposes.
(d) Neither the Company nor the Stockholders is obligated under any
agreement, contract or arrangement that will result in the payment of any amount
that would not be deductible by reason of Sections 162(m) or 280G of the Code.
15
(e) The Company has not been nor, to the Company's knowledge, will be
required to include any material adjustment in Taxable income for any Tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax Laws as a result of
transactions, events or accounting methods employed prior to the Merger other
than any such adjustments required as a result of the Merger. The Company has
filed or will file any consent to have the provisions of paragraph 341(f) of the
Code (or comparable provisions of any state Tax Laws) apply to the Company. The
Company has not filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign Law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any Tax Return. The Company
is not currently and has not been a United States real property holding
corporation (within the meaning of Section 897(c)(2) of the Code) during the
applicable periods specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company has not incurred any liability for Taxes pursuant to
Section 1374 or 1375 of the Code (and any predecessor provision and any similar
provision of applicable state or local or other Tax Law).
(g) The Company has not been the "distributing corporation" (within the
meaning of Section 355(c)(2) of the Code) with respect to a transaction
described in Section 355 of the Code within the three (3) year period ending as
of the date of this Agreement.
Section 3.15 Employee Benefit Plans.
(a) Schedule 3.15(a) to the Company's Disclosure Schedule lists: (i) all
"employee benefit plans" within the meaning of Section 3(3) of ERISA, (ii) all
employment agreements, including, but not limited to, any individual benefit
arrangement, policy or practice with respect to any current or former employee
or director of the Company, and (iii) all other employee benefit, bonus or other
incentive compensation, stock option, stock purchase, stock appreciation,
severance pay, lay-off or reduction in force, change in control, sick pay,
vacation pay, salary continuation, retainer, leave of absence, educational
assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which the
Company maintains, to which any of them contributes, or for which any of them
has any obligation or liability (collectively, the "PLANS").
(b) None of the Plans is a Defined Benefit Plan, and neither the Company
nor Member of the Controlled Group or has ever sponsored, maintained or
contributed to, or ever been obligated to contribute to, a Defined Benefit Plan.
(c) None of the Plans is a Multiemployer Plan, and neither the Company, a
Member of the Controlled Group or the Stockholders has ever contributed to, or
ever been obligated to contribute to, a Multiemployer Plan.
(d) The Company does not maintain or contribute to any plan that provides
health benefits to an employee after the employee's termination of employment or
retirement except as required under Section 4980B of the Code and Sections 601
through 608 of ERISA.
16
(e) Each Plan which is an "employee benefit plan," as defined in Section
3(3) of ERISA, complies in all material respects by its terms and in operation
with the requirements provided by any and all statutes, orders or governmental
rules and regulations currently in effect and applicable to the Plan, including
but not limited to ERISA and the Code.
(f) All reports, forms and other documents required to be filed with any
government entity or furnished to employees, former employees or beneficiaries
with respect to any Plan (including without limitation, summary plan
descriptions, Forms 5500 and summary annual reports) have been timely filed and
furnished and are accurate, except for those instances which, either
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(g) Each of the Plans that are intended to qualify under Section 401(a) of
the Code has been determined by the Internal Revenue Service to so qualify after
January 1, 1989, and each trust maintained pursuant thereto has been determined
by the Internal Revenue Service to be exempt from taxation under Section 501 of
the Code. Nothing has occurred since the date of the Internal Revenue Service's
favorable determination letter that could adversely affect the qualification of
the Plan and its related trust. The Company and each Member of the Controlled
Group or have timely amended and operated each of these Plans to comply with the
Small Business and Job Protection Act of 1996 and subsequent legislation enacted
through the date hereof, and Section 501 of the Code.
(h) All contributions for all periods ending prior to the Closing Date
(including periods from the first day of the current plan year to the Closing
Date) have been made prior to the Closing Date by the Company or have been
reserved against on the Company Financial Statements.
(i) All insurance premiums have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to the Plans for
plan years ending on or before the Closing Date, except for those instances
which, either individually or in the aggregate, would not have a Company
Material Adverse Effect.
(j) With respect to each Plan: (i) to the Company's knowledge, no
"prohibited transactions" (as defined in Section 406 or 407 of ERISA or Section
4975 of the Code) have occurred for which a statutory exemption is not
available; (ii) no action or claims (other than routine claims for benefits made
in the ordinary course of Plan administration for which Plan administrative
review procedures have not been exhausted) are pending, or to the knowledge of
the Company, threatened or imminent against or with respect to the Plan, any
employer who is participating (or who has participated) in any Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the Plan; (iii) neither the
Company, nor any fiduciary has any knowledge of any facts that could give rise
to any such action or claim; and (iv) it provides that it may be amended or
terminated at any time and, except for benefits protected under Section 411(d)
of the Code, all benefits payable to current, terminated employees or any
beneficiary may be amended or terminated by the Company at any time without
liability other than ordinary administrative expenses.
17
(k) Neither the Company nor, to the knowledge of the Company, any of its
Affiliates has any material liability or is, to the knowledge of the Company,
threatened with any material liability (whether joint or several): (i) for any
excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or
(ii) to a fine under Section 502 of ERISA.
(l) All of the Plans, to the extent applicable, are in material compliance
with the continuation of group health coverage provisions contained in Section
4980B of the Code and Sections 601 through 608 of ERISA.
(m) True, correct and complete copies of all documents creating or
evidencing any Plan have been delivered or made available to Parent, and true,
correct and complete copies of all reports, forms and other documents required
to be filed with any Governmental Entity or furnished to employees, former
employees or beneficiaries (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for all plans subject to
ERISA, but excluding individual account statements and tax forms) have been
delivered to Parent. There are no negotiations, demands or proposals which are
pending or have been made which concern matters now covered, or that would be
covered, by the type of agreements required to be listed in Schedule 3.15(a) and
that are reasonably likely to have a Company Material Adverse Effect.
(n) All expenses and liabilities relating to all of the Plans have been,
and will on the Closing Date be fully and properly accrued on the Books and
Records.
Section 3.16 Certain Agreements Affected by the Merger. Except as set
forth on Schedule 3.16 to the Company's Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) result in any material payment
(including, without limitation, any severance, unemployment compensation, golden
parachute or bonus payment) becoming due to any director, officer, agent or
employee of the Company or any other third party, (ii) materially increase any
benefits otherwise payable by the Company to its respective employees, (iii)
result in the acceleration of the time of payment or vesting of any such
benefits or (iv) breach, cause an event of default or give any third party any
rights against the Company or the Company Intellectual Property under any
Company IP Agreement.
Section 3.17 Employee Matters.
(a) The Company is in compliance in all material respects with all
currently applicable Laws respecting employment, discrimination in employment,
terms and conditions of employment, wages, hours and occupational safety and
health and employment practices, and are not engaged in any unfair labor
practice, except where the failure to be in compliance or the engagement in
unfair labor practices has not had and would not be reasonably expected to have
a Company Material Adverse Effect. The Company is in all material respects
withheld all amounts required by Law or by agreement to be withheld from the
wages, salaries, and other payments to their respective employees; and are not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing.
18
(b) The Company is not liable for any payment to any trust or other fund
or to any Governmental Entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending claims against the Company under any
workers' compensation plan or policy or for long term disability that are not
covered by insurance. The Company has no obligations under COBRA with respect to
any former employees or qualifying beneficiaries thereunder, except obligations
that would not have a Material Adverse Effect on the Company.
(c) There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company and its employees (including, without
limitation, controversies relating to sexual or age discrimination, sexual
harassment or similar controversies), which controversies have or could
reasonably be expected to result in a Proceeding against the Company before any
Governmental Entity except for such Proceeding that would not have a Company
Material Adverse Effect.
(d) The Company is not a party to any collective bargaining agreement or
other labor union contract, nor does the Company know of any activities or
proceedings of any labor union or organization of any such employees.
(e) No employees of the Company are in violation of any term of any
employment contract, patent disclosure agreement, enforceable non-competition
agreement, or any enforceable restrictive covenant to a former employer relating
to the right of any such employee to be employed by the Company because of the
nature of the business conducted or presently proposed to be conducted by the
Company or to the use of trade secrets or proprietary information of others
where such violation would or would reasonably be expected to have a Company
Material Adverse Effect or, following the Effective Time, a Parent Material
Adverse Effect. No employees or consultants who are considered key to the
operations or the business of the Company have given notice to the Company, nor
is the Company otherwise aware that any such employee intends to terminate his
or her employment or consultancy with the Company.
Section 3.18 Insurance. The Company has made available to Parent all
material policies of insurance of the Company as set forth on Schedule 3.18 to
the Company Disclosure Schedule, and such Schedule is complete and accurate.
There is no material claim pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and the Company is otherwise in compliance with the terms
of such policies and bonds. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies. The Company has not been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially adversely affect the business,
business prospects, properties, condition (financial or otherwise) or results of
operations of the Company.
19
Section 3.19 Customers and Suppliers. Schedule 3.19 to the Company
Disclosure Schedule lists the top five suppliers and customers of the Company in
terms of gross purchases and gross revenues, respectively, since the inception
of the Company. No such customer and no such supplier of the Company has
cancelled or otherwise terminated or made any written threat to the Company or
the Stockholders to cancel or otherwise terminate its relationship with the
Company or, at any time on or after the Reference Balance Sheet Date, has
materially decreased its purchases or supplies to the Company and, to the
Company's knowledge, no such supplier or customer intends to cancel or otherwise
terminate its relationship with the Company or to decrease materially its
services or supplies to the Company or its usage of the services or products of
the Company, as the case may be. The Company has not knowingly breached, so as
to provide a benefit to the Company or any of it's Affiliates (including the
Stockholders) not were intended by the parties, any agreement with, or engaged
in any fraudulent conduct with respect to, any customer or supplier of the
Company.
Section 3.20 Material Contracts. Except: (i) for the Company IP
Agreements, (ii) as set forth on Schedule 3.20 to the Company Disclosure
Schedule (the contracts listed on such Schedule, together with the Company IP
Agreements, being collectively referred to herein as the "MATERIAL CONTRACTS")
and (iii) for this Agreement, and other contracts and agreements which
individually or in the aggregate are not material to the Company's business, the
Company is not a party to or bound by:
(a) any agreement, contract, instrument or understanding relating to any
Intellectual Property (including the Company Intellectual Property);
(b) any distributor, sales, agency or manufacturer's representative,
consulting, joint-venture, or partnership contract, joint research and
development contract or technology sharing arrangements;
(c) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$10,000 over the life of the contract;
(d) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(e) any contract for capital expenditures in excess of $10,000 in the
aggregate;
(f) any contract limiting the freedom of the Company to engage in any line
of business, to acquire any product or asset from any other Person, to sell any
product or asset to, or to perform any service for, any Person, or to compete
with any other Person;
(g) any confidentiality, secrecy or non-disclosure contract, which
individually or in the aggregate, materially affects or could be reasonably
anticipated to materially affect the business or operations of the Company;
(h) any contract pursuant to which the Company is a lessor of real
property or any machinery, equipment, motor vehicles, office furniture, fixtures
or other personal property involving in the case of any such personal property
contact more than $10,000 over the life of the contract;
20
(i) any contract with any Person with whom the Company does not deal at
arm's length or any agreement with either or both Stockholders;
(j) any contract which provides for the indemnification of any officer,
director, employee or agent; or
(k) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person.
Section 3.21 No Breach of Material Contracts. All Material Contracts are
in the written form previously provided or made available to Parent. The Company
has performed all of the material obligations required to be performed by it as
of the date hereof and is entitled to all benefits under, and is not alleged to
be in material breach or default in respect of any Material Contract. Each of
the Material Contracts is in full force and effect, unamended except as provided
or made available to Parent, and there exists no default or event of default or
event, occurrence, condition or act, with respect to the Company or, to the
Company's knowledge, with respect to the other contracting party, which, with
the giving of notice or the lapse of the time, would become a default or event
of default under any Material Contract or would give any Person the right to
exercise any remedy, or the right to any rebate, chargeback, penalty or change
in delivery schedule, except to the extent such defaults, remedies, penalties or
changes have not had and would not be reasonably expected to have a Company
Material Adverse Effect.
Section 3.22 Real Property and Real Property Leases.
(a) Schedule 3.22(a) to the Company Disclosure Schedule sets forth an
accurate, correct and complete list of each parcel of real property owned by the
Company (the "REAL PROPERTY"), including a street address, and a list of all
leases, contracts or other agreements to which the Company is a party and
affecting the Real Property or any interest therein. The Company has delivered
to Parent accurate, correct and complete copies of all such leases, contracts,
and agreements. The Company is the sole and exclusive legal and record owner of
and has good and marketable title in fee simple absolute to, and is in
possession of, all Real Property, including the buildings, structures, fixtures
and improvements situated thereon and appurtenances thereto, including such
right of ways and easements running toward the benefit of such Real Property, in
each case free and clear of all tenancies and other possessory interests,
security interests, conditional sale or other title retention agreements, Liens,
assessments, easements, rights of way, covenants, restrictions, reservations,
options, rights of first refusal, defects in title, encroachments and other
burdens, except the leases, contracts, agreements and other matters set forth on
Schedule 3.22(a) to the Company Disclosure Schedule or except those that do not
materially and adversely affect the current use and operation of such
properties. All leases, contracts and agreements to which the Company is a party
and affecting the Real Property are set forth on Schedule 3.22(a) to the Company
Disclosure Schedule and are legally valid and binding and in full force and
effect, and there are no defaults, offsets, counterclaims or defenses
thereunder, and the Company has received no notice of default, offset,
counterclaim or defense under any such contracts.
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(b) No Real Property is located within a designated erosion, flood or
seismic safety hazard area. Neither the whole nor any portion of any Real
Property owned, leased, occupied or used by the Company has been condemned,
requisitioned or otherwise taken by any public authority, and no notice of any
such condemnation, requisition or taking has been received. To the knowledge of
the Company, no such condemnation, requisition or taking is threatened or
contemplated. The Company has no knowledge of any public improvements which may
result in special assessments against or otherwise affect the Real Property
(c) To the Company's knowledge, the Real Property is in material
compliance with all applicable Environmental Laws, planning, zoning, building,
health, fire, water, use or similar legal requirements. The zoning of each
parcel of Real Property permits the existing improvements and the continuation
following consummation of the transaction contemplated hereby of the businesses
of the Company and its Affiliates as presently conducted thereon. The Company
has all licenses, certificates of occupancy, permits and authorizations required
to utilize the Real Property for the business presently conducted thereon. The
Company has all easements and rights necessary to conduct its businesses,
including easements for all utilities, services, roadway, railway and other
means of ingress and egress. The Real Property as conveyed pursuant to this
Agreement shall include all rights to any off-site facilities necessary to
ensure compliance in all material respects with all applicable planning, zoning,
building, health, fire, water, use or similar legal requirements. To the
knowledge of the Company, no fact or condition exists which would result in the
termination or impairment of existing access to the Real Property or
discontinuation of existing sewer, water, electric, gas, telephone or other
communications facilities, waste disposal or other utilities or services serving
the Real Property. To the knowledge of the Company, the facilities servicing the
Real Property are in material compliance with all applicable legal requirements.
(d) The Company has delivered to Parent accurate, correct and complete
copies of all existing title insurance policies, title reports, surveys,
environmental reports, if any, with respect to each parcel of Real Property.
(e) With respect to the Real Property:
(i) to the knowledge of the Company, there are no outstanding
options or rights of first refusal or similar rights to purchase any such parcel
or any portion thereof or interest therein, except as disclosed in written
agreements relating thereto as set forth on Schedule 3.22(a) to the Company
Disclosure Schedule, and
(ii) to the knowledge of the Company, each such parcel abuts on and
has adequate direct vehicular access to a public road and there is no pending
or, to the knowledge of the Company, threatened termination of such access.
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(f) Schedule 3.22(f) to the Company Disclosure Schedule sets forth a list
of all leases, licenses or other occupancy agreements to which the Company is a
party, that are for the use or occupancy of real estate owned by a third party
("LEASES") (copies of which have previously been furnished to Parent), in each
case, setting forth: (i) the lessor and lessee thereof and the commencement
date, term and renewal rights under each of the Leases, and (ii) the street
address or legal description of each property covered thereby (the "LEASED
PREMISES"). The Leases are in full force and effect in all material respects,
and to the knowledge of the Company, have not been amended, and the Company is
not and, to the knowledge of the Company, no other party thereto, is in default
or breach under any such Lease and no event has occurred by the Company that,
with the passage of time or the giving of notice or both, would cause a breach
of or default of the Company under any of such Leases, except to the extent such
default would not have a Company Material Adverse Effect. Except as set forth on
Schedule 3.22(f) to the Company Disclosure Schedule, the Company has valid
leasehold interests in each of the Leased Premises, which leasehold interest is
free and clear of any Liens, covenants and easements or title defects of any
nature whatsoever.
(g) With respect to the Leased Premises, and except as set forth on
Schedule 3.22(g) to the Company Disclosure Schedule:
(i) there are no pending or, to the knowledge of the Company,
threatened condemnation proceedings, suits or administrative actions relating to
any such parcel or other matters affecting materially and adversely the current
use, occupancy or value thereof,
(ii) to the knowledge of the Company, all improvements, buildings
and systems on any such parcel are in good repair and safe for their current
occupancy and use,
(iii) to the knowledge of the Company, there are no contracts or
agreements (whether oral or written) granting to any party or parties the right
of use or occupancy of any such parcel, and there are no parties (other than the
Company) in possession of any such parcel,
(iv) to the knowledge of the Company, there are no outstanding
options or rights of first refusal or similar rights to purchase any such parcel
or any portion thereof or interest therein,
(v) to the knowledge of the Company, all Facilities located on each
such parcel are supplied with utilities and other services necessary for their
ownership, operation or use, currently or as currently proposed by the Company,
all of which services are adequate in accordance with all applicable Laws, and
(vi) to the knowledge of the Company, each such parcel abuts on and
has adequate direct vehicular access to a public road and there is no pending
or, to the knowledge of the Company, threatened termination of such access.
Section 3.23 Certain Business Practices. Neither the Company, the
Stockholders nor any of their respective employees or agents has at any time:
(i) used any Company funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity in respect of the
Company's or such subsidiary's business, (ii) directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, or other party acting on behalf of or under
the auspices of a governmental official or Governmental Entity, in the United
States or any other country, which is in any manner illegal under any applicable
Law or (iii) to the knowledge of the Company, made any payment to any customer
or supplier of the Company or such Subsidiary, or given any other consideration
to any such customer or supplier in respect of the Company's or such
subsidiary's business that violates applicable Law in any material respect.
23
Section 3.24 Interested-Party Transactions. Except as set forth on
Schedule 3.24 to the Company Disclosure Schedule, no officer, director or
stockholder of the Company, no relative or spouse (or relative of such spouse)
who resides with, or is a dependent of any of the foregoing, and no Affiliate of
any of the foregoing has or has had, directly or indirectly: (i) an economic
interest in any Person that has furnished or sold, or furnishes or sells,
services or products that the Company furnishes or sells, or proposes to furnish
or sell, (ii) an economic interest in any Person that purchases from or sells or
furnishes to, the Company, any goods or services, (iii) a beneficial interest in
any Material Contract or (iv) holds any indebtedness to the Company.
Section 3.25 Information Supplied. None of: (i) the information, documents
or other due diligence matters supplied or to be supplied by or on behalf of
Company to Parent in connection with this Agreement or any of the transactions
contemplated hereby, (ii) the representations and warranties of the Company and
the Stockholders contained in this Agreement or any Other Agreement or (iii) the
Company Disclosure Schedule contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
Section 3.26 Brokers' and Finders' Fees. The Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement, the Merger or any other transaction
contemplated hereby or pursuant to any Other Document.
Section 3.27 Vote Required. The affirmative vote of the holders of a
majority of the shares of the Company Common Stock outstanding is the only vote
of the holders of any of the Company's Capital Stock or any other agreement to
which the Company or the Stockholders are a party necessary to approve this
Agreement, any Other Agreement and the transactions contemplated hereby and
thereby.
Section 3.28 Board Approval. The Board of Directors of the Company has:
(i) reviewed, deliberated and approved this Agreement and the Merger, (ii)
determined that there are no other proposed extraordinary transactions with the
Company on terms more advantageous to the stockholders of the Company, (iii)
that the Merger is in the best interests of the stockholders of the Company and
is on terms that are fair to such stockholders, and (iv) recommended that the
stockholders of the Company approve this Agreement and the Merger.
24
Section 3.29 Reorganization Matters. To the Company's knowledge neither
the Company nor any of its Affiliates has taken or agreed to take any action,
nor does the Company have knowledge of any fact or circumstance, that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code.
Section 3.30 No Opinion of Financial Advisor. The Company has not and will
not engage the services of a financial advisor for a fairness opinion.
Section 3.31 Investigation by the Company and the Stockholders. The
Company and the Stockholders have conducted their own independent investigation,
review and analysis of the business, operations, assets, liabilities, results of
operations, financial condition, Intellectual Property and prospects of the
Parent, which investigation, review and analysis was done by the Company and its
Affiliates and, to the extent the Company deemed appropriate, by the Company's
representatives. The Company and the Stockholders have received, read, reviewed
and investigated all material information contained within the Parent SEC
Documents (as defined below) including, without limitation, all risk factors
contained in the registration statements and annual reports of Parent and its
subsidiary, Bioral Nutrient Delivery, LLC. The Company and the Stockholders
acknowledge that it and its representatives have been provided adequate access
to the personnel, properties, premises and records of the Parent and its
subsidiaries as they have requested for such purpose. In entering into this
Agreement, the Company acknowledges that it has relied solely upon the
aforementioned investigation, review and analysis and not on any factual
representations or opinions of the Parent's or any of the Parent's
representatives (except the specific representations and warranties of the
Parent set forth in this Agreement and the Parent Disclosure Schedule). The
Company and the Stockholders haves formed an independent judgment concerning the
Parent.
Section 3.32 Company Disclosure Schedule. It is understood and agreed that
any disclosure in the Company Disclosure Schedule shall qualify the disclosure
under the specific section number referred to in the Company Disclosure Schedule
as well as all other sections in this Agreement when it is reasonably apparent
from a reading of such disclosure that it also qualifies or applies to such
other sections. The Company shall make all reasonable efforts to specifically
cross reference in the Company Disclosure Schedule all sections where a
particular disclosure qualifies or applies.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the Parent Disclosure Schedule or as specifically
provided for in this Article IV, Parent hereby represents and warrants to the
Company and the Stockholders as follows:
Section 4.1 Organization, Standing and Power. Parent and each of its
subsidiaries, including Merger Sub, are corporations duly organized, validly
existing and in good standing under the Laws of their respective jurisdictions
of organization. Each of Parent and its subsidiaries, including Merger Sub, have
the corporate power to own their respective properties and to carry on their
respective businesses as now being conducted and as proposed to be conducted and
are each duly qualified to do business and are in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Parent Material Adverse Effect. Neither Parent nor any of its
subsidiaries, including Merger Sub, is in violation of any of the provisions of
its respective Certificate of Incorporation or Bylaws or equivalent
organizational documents. Parent is the owner of all outstanding shares of
capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and non-assessable. Except as disclosed
in the Parent SEC Documents, Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity, excluding
securities in any publicly traded company held for investment by Parent or any
of it subsidiaries in accordance with and pursuant to the Parent's formal
investment policy and comprising less than 5% of the outstanding stock of such
company.
25
Section 4.2 Capital Structure.
(a) The authorized capital stock of Parent consists of: (i) 45,000,000
shares of Parent Common Stock, of which there were 7,085,863 shares issued and
6,985,763 shares outstanding as of the Execution Date, and (ii) 5,000,000 shares
of preferred stock, par value $.001, of which 1,647,059 shall be designated as
Parent Preferred Stock on or prior to the Closing Date, and of which no shares
are issued and outstanding as of the Closing Date. No other shares of preferred
stock of Parent have been designated as of the Execution Date. As of the
Execution Date, there are no other outstanding shares of capital stock or voting
securities and no outstanding commitments to issue any shares of capital stock
or voting securities, other than: (i) publicly-traded warrants to purchase
2,085,000 shares of Parent Common Stock at an exercise price of $6.30 per share
as of the Execution Date (the "PARENT WARRANTS") or (ii) pursuant to the
exercise of options outstanding under the 2001 Stock Option Plan of the Company
(as amended, the "PARENT STOCK OPTION PLAN" and such options, the "PARENT
OPTIONS"). The authorized capital stock of Merger Sub consists of 45,000,000
shares of common stock, par value $.001 per share, of which 1,000 shares are
issued and outstanding and held by Parent, and 5,000,000 shares of preferred
stock, par value $.001 per share, of which no shares are issued and outstanding.
The shares of Parent Preferred Stock to be issued in the Merger will, upon
issuance, be duly authorized, validly issued, fully paid and non-assessable.
(b) All outstanding shares of Parent Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any Liens, other
than any Liens created by or imposed upon the holders thereof, and are not
subject to preemptive rights or rights of first refusal created by Delaware Law,
the Certificate of Incorporation or Bylaws of Parent or any agreement to which
Parent is a party or by which it is bound. As of the close of business on the
Execution Date, Parent has reserved 2,100,000 shares of Parent Common Stock for
issuance to directors, employees and consultants pursuant to the Parent Stock
Option Plan. As of the Execution Date, 1,333,416 shares of Parent Common Stock
are issuable upon the exercise of vested Parent Options and 2,085,000 shares of
Parent Common Stock are issuable upon exercise of the Parent Warrants. On the
Execution Date, except as set forth on Schedule 4.2(b) to the Parent Disclosure
Schedule and in the Parent SEC Documents and except for: (i) the rights created
pursuant to this Agreement, the Parent Stock Option Plan, the Parent Options and
the Parent Warrants and (ii) Parent's right to repurchase any unvested shares
under the Parent Stock Option Plan, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which Parent is a party or
by which it is bound obligating Parent to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of Parent Capital Stock or obligating Parent to grant, extend, accelerate
the vesting of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement. Except as set forth on
Schedule 4.2(b) to the Parent Disclosure Schedule, the consummation of the
merger transaction and other transactions contemplated hereby shall not
increase, decrease, nor otherwise affect: (i) the number of shares for which any
Parent Warrants or Parent Options are exercisable or (ii) the exercise price for
any shares issuable pursuant to the Parent Warrants or Parent Options.
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(c) Except as set forth on Schedule 4.2(c) to the Parent Disclosure
Schedule, there are no voting trusts or agreements, stockholders' agreements,
pledge agreements, buy-sell agreements, rights of first refusal, preemptive
rights, registration rights or proxies relating to any securities of Parent to
which Parent is a party or, to Parent's knowledge, to which Parent is not a
party. All of the outstanding securities of Parent were issued in compliance
with all applicable Federal and state securities laws.
Section 4.3 Authority.
(a) Parent and Merger Sub each have all requisite corporate power and
authority to enter into this Agreement, each Other Document to which they are a
party and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, each Other Document and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each of Parent and
Merger Sub, as applicable, other than action by the Company's stockholders to
approve the conversion of shares of Parent Preferred Stock which are convertible
into 20% or more of Parent's outstanding Parent Common Stock as of the date
hereof.
(b) This Agreement and each Other Document to which they are a party have
been duly executed and delivered by each of Parent and Merger Sub, as
applicable, and each constitutes the valid and binding obligations of Parent and
Merger Sub enforceable against each by the Company in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar Laws and equitable principles relating to or limiting
creditors' rights generally and by general principles of equity. The execution
and delivery of this Agreement and each Other Document to which they are a party
do not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a benefit
under: (i) any provision of the Certificate of Incorporation or Bylaws of Parent
or the Certificate of Incorporation or Bylaws of Merger Sub, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, Law,
ordinance, rule or regulation applicable to Parent, Merger Sub or their
respective properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions in subsection (ii) would not have had and would not be reasonably
expected to have a Parent Material Adverse Effect.
27
(c) Except as would not have a Parent Material Adverse Effect, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required with respect to Parent or Merger Sub
in connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated hereby and thereby, except for (i) the filing of the Certificate of
Merger, together with the required officers' certificates, as provided in
Section 2.2, (ii) any filings as may be required under applicable federal, state
and local securities laws and the securities laws of any foreign country, (iii)
such filings as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, (iv) the filing with the NASDAQ Small Cap Market
("NASDAQ") for the listing of shares of Parent Common Stock issuable upon
conversion of the Parent Preferred Stock in the Merger; and (v) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.
Section 4.4 SEC Documents; Financial Statements. Parent has made available
to the Company (via the SEC's XXXXX system or otherwise) each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act, including the risk factors contained therein),
definitive proxy statement, and other filing filed with the SEC (including,
without limitation, all filings made under and pursuant to the Exchange Act) by:
(i) Parent since January 1, 2000 and (ii) Bioral Nutrient Delivery, LLC, a
subsidiary of Parent (collectively, the "PARENT SEC DOCUMENTS"). In addition,
Parent has made available to the Company (via the SEC's XXXXX system or
otherwise) all exhibits to the Parent SEC Documents filed prior to the date
hereof, and will promptly make available to the Company all exhibits to any
additional Parent SEC Documents filed prior to the Effective Time. Except as set
forth on Schedule 4.4 to the Parent Disclosure Schedule, as of their respective
filing dates, the Parent SEC Documents complied in all material respects with
the requirements of the Exchange Act and the Securities Act. The financial
statements of Parent, including the notes thereto, included in the Parent SEC
Documents (the "PARENT FINANCIAL STATEMENTS") were complete and correct in all
material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the SEC). The Parent Financial Statements fairly present in all material
respects the consolidated financial condition and operating results of Parent as
of the dates and for the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). For the period
from inception through December 31, 2003, Parent, on a cumulative basis, does
not have any earnings or profits. Parent has fully complied with all
certification requirements, and will comply with all certification requirements
prior to the Effective Time, under the Xxxxxxxx-Xxxxx Act of 2002 and the rules
and regulations promulgated thereunder.
Section 4.5 Absence of Undisclosed Liabilities. Parent has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than: (i) those set forth or adequately provided for in the
balance sheet or in the notes to the Parent Financial Statements included in the
Parent Financial Statements in Parent's Quarterly Report on Form 10-QSB for the
period ended on March 31, 2004 (the "PARENT BALANCE SHEET DATE"), (ii) those
incurred in the ordinary course of business since the Parent Balance Sheet Date
and consistent with past practice, (iii) those incurred in connection with the
execution of this Agreement, and (iv) those disclosed on Schedule 4.5 to the
Parent Disclosure Schedule.
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Section 4.6 Litigation. Except as set forth in the Parent SEC Documents,
as of the date of this Agreement, there is no material private or governmental
action, suit, proceeding, claim, arbitration, governmental investigation, or to
the knowledge of Parent private investigation, pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Parent or any of its
subsidiaries, threatened against Parent, any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such). There is no judgment, decree or order against Parent or any
of its subsidiaries, or, to the knowledge of Parent, or any of its subsidiaries,
or any of their respective directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Parent Material Adverse Effect. Schedule 4.6 to the Parent Disclosure Schedule
also lists all material litigation that Parent has pending as of the date of
this Agreement against other parties which is not disclosed in the Parent SEC
Documents.
Section 4.7 Reorganization Matters. To Parent's knowledge, neither Parent
nor any of its Affiliates has taken or agreed to take any action, nor does
Parent have knowledge of any fact or circumstance, that would prevent the Merger
from qualifying as a tax-deferred reorganization within the meaning of Section
368 of the Code.
Section 4.8 Brokers' and Finders' Fees. Neither Parent nor Merger Sub has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement, the Merger or any other
transaction contemplated hereby or pursuant to any Other Document.
Section 4.9 Board Approval. The Board of Directors of Parent has: (i)
approved this Agreement and the Merger and (ii) determined that the Merger is in
the best interests of the stockholders of Parent and is on terms that are fair
to such stockholders. Except to approve the conversion of shares of Parent
Preferred Stock which are convertible into 20% or more of Parent's outstanding
Parent Common Stock as of the date hereof, no approval of Parent's stockholders
is required in connection with the Merger.
Section 4.10 Investigation by Parent. Parent has conducted its own
independent investigation, review and analysis of the business, operations,
assets, liabilities, results of operations, financial condition, Intellectual
Property and prospects of the Company, which investigation, review and analysis
was done by Parent and its Affiliates and, to the extent Parent deemed
appropriate, by Parent's representatives. Parent acknowledges that it and its
representatives have been provided adequate access to the personnel, properties,
premises and records of the Company and the Company Subsidiaries as Parent has
requested for such purpose. In entering into this Agreement, Parent acknowledges
that it has relied solely upon the aforementioned investigation, review and
analysis and not on any factual representations or opinions of the Company's or
any of the Company's representatives (except the specific representations and
warranties of the Company set forth in this Agreement and the Company Disclosure
Schedule). Parent has formed an independent judgment concerning the Company.
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Section 4.11 Absence of Certain Changes. Except as set forth in the Parent
SEC Documents prior to the date hereof or as expressly contemplated by this
Agreement or as disclosed on Schedule 4.11 to the Parent Disclosure Schedule,
since the Parent Balance Sheet Date there has not occurred any change, event or
condition (whether or not covered by insurance or similar indemnification
agreement) that has resulted in, or would reasonably be expected to result in, a
Parent Material Adverse Effect.
Section 4.12 Information Supplied. None of: (i) the information, documents
or other due diligence matters supplied or to be supplied by or on behalf of
Parent to the Company in connection with this Agreement or any of the
transactions contemplated hereby, (ii) the representations and warranties of
Parent contained in this Agreement or any Other Agreement or (iii) the Parent
Disclosure Schedule contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
Section 4.13 Parent Disclosure Schedule. It is understood and agreed that
any disclosure in the Parent Disclosure Schedule shall qualify the disclosure
under the specific section number referred to in the Parent Disclosure Schedule
as well as all other sections in this Agreement when it is reasonably apparent
from a reading of such disclosure that it also qualifies or applies to such
other sections. Parent shall make all reasonable efforts to specifically cross
reference in the Parent Disclosure Schedule all sections where a particular
disclosure qualifies or applies. In addition, the Company and the Stockholders
specifically agree that they have had access to and have knowledge of the
contents of all of the Parent SEC Documents as well as all press releases issued
by Parent since inception.
ARTICLE V .
CONDUCT PRIOR TO THE EFFECTIVE TIME
Section 5.1 Conduct of Business. During the period from the Execution Date
and continuing until the earlier of the termination of this Agreement or the
Effective Time, the Parent and the Company each agree (except to the extent
expressly contemplated by this Agreement or for those matters disclosed on the
Company Disclosure Schedule or Parent Disclosure Schedule, as the case may be)
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. The Parent and, subject
to Section 5.2 hereof, the Company further agree to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organizations, to keep available the services of its present officers
and key employees and to use its best efforts and all available resources to
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it, to the end that its
goodwill and ongoing businesses shall be unimpaired at the Effective Time, other
than what would not have a Parent or a Company Material Adverse Effect. Each
party agrees, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time, to
promptly notify the other party in writing of any event or occurrence not in the
ordinary course of its business, and of any event which could reasonably be
expected to have a material effect on the business, assets, properties or
prospects of, respectively, Parent or the Company.
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Section 5.2 Restriction on Conduct of Business of the Company. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, except as set forth in the
Company Disclosure Schedule or as expressly contemplated by this Agreement, the
Company and the Stockholders shall not do, cause or permit any of the following,
without the prior written consent of Parent, which consent shall be given within
three (3) days business days of written notification from the Company requesting
such consent:
(a) Charter Documents. Cause or permit any amendments to its Certificate
of Incorporation or Bylaws (including the adoption of a "poison pill").
(b) Dividends; Changes in Capital Stock. Declare or pay any dividends on
or make any other distributions (whether in cash, stock or property) in respect
of any of its capital stock; or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it.
(c) Material Contracts. Violate, breach, cause a default, comprise (or
take any action which would reasonably lead to any of the foregoing) or
terminate, amend or otherwise modify or waive any of the terms of any Material
Contracts (including, without limitation, any Company IP Contracts or contracts,
agreements or understandings with employees, officers, directors, stockholders
or consultants).
(d) Issuance of Securities. Except for: (i) the transfer of the Company
Common Stock contemplated by this Agreement and (ii) the issuance of shares of
the Company Common Stock pursuant to the exercise of the Company Options issued
and outstanding on the Execution Date (all which shall be exercised prior to the
Closing Date), issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of
Company Capital Stock, Company Options or Company Convertible Securities or any
other securities of the Company, or subscriptions or other rights to acquire, or
other agreements or commitments of any character obligating it to issue any such
securities.
(e) Intellectual Property. Sell, transfer or assign to any Person, or
create any Lien encumbering, any Company Intellectual Property or any rights to
any Company Intellectual Property.
(f) Indebtedness. Incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others.
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(g) Payment of Obligations. Except any payments due to Atrix or pursuant
to any Company IP Agreement, pay, discharge or satisfy or commit or agree to
pay, discharge or satisfy, in an amount in excess of $20,000 in any one case or
$50,000 in the aggregate, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of liabilities reflected or reserved against in the
Company Financial Statements
(h) Capital Expenditures. Make any capital expenditures, capital additions
or capital improvements in excess of $25,000 in any one case or $75,000 in the
aggregate.
(i) Insurance. Materially reduce the amount of any insurance coverage
provided by existing insurance policies.
(j) Employee Benefit Plans; Pay Increases. (i) Adopt or amend any employee
benefit or stock purchase or option plan, except for amendments required under
ERISA or except as necessary to maintain the qualified status of such plan under
the Code or (ii) increase the annual level of compensation of any employee, or
grant any unusual or extraordinary bonuses, benefits or other forms of direct or
indirect compensation to any employee, officer, director or consultant, except
as required by a Material Contract.
(k) Lawsuits. Commence a lawsuit other than: (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Parent prior to the
filing of such a suit, or (iii) for a breach of this Agreement or any Exhibits
hereto.
(l) Taxes and Accounting. (i) Other than as required by GAAP, make or
change any material election in respect of Taxes, (ii) adopt or change any
accounting method in respect of Taxes or otherwise or (iii) write up, write down
or write off the value of any assets or revalue any assets including, without
limitation, any Company Intellectual Property.
Section 5.3 No Solicitation. During the period from the Execution Date and
continuing until the earlier of the termination of this Agreement or the
Effective Time, the Stockholders, the Company and the Company's officers,
directors, employees or other agents will not, directly or indirectly: (i) take
any action to solicit, initiate or intentionally encourage any Takeover Proposal
(as defined below) or (ii) take any action to solicit, intentionally facilitate,
intentionally encourage or engage in negotiations or discussions with, or
disclose any nonpublic information relating to the Company to, or afford access
to the properties, Books or Records of the Company to, any Person that has
advised the Company in writing that it intends to make, or that has made, a
Takeover Proposal. For purposes of this Agreement, the term "TAKEOVER PROPOSAL"
shall mean any offer or proposal for, or any indication of interest in (whether
written or oral), a merger or other business combination involving the Company
or the acquisition of any equity interest in, or any of material assets of, the
Company, other than the transactions contemplated by this Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access to Information; Disclosure Schedule Updates.
(a) Upon reasonable notice, each party hereto shall afford the other party
and its accountants, legal counsel and other representatives, reasonable access
during normal business hours during the period from the Execution Date until the
Effective Time or the earlier termination of this Agreement in accordance with
its terms, provided that Parent or the Company contacts the other party's Chief
Executive Officer prior to contacting any other employee of the other party
hereto, to: (i) review all of the properties, books, contracts, commitments and
records, and (ii) all other information concerning the business, properties and
personnel of the other party as may be requested. Each party agrees to provide
to the other party hereto and its accountants, legal counsel and other
representatives copies of internal financial statements and other business
analysis and documentation promptly upon request.
(b) Subject to compliance with applicable Law, from the date hereof until
the Effective Time or the earlier termination of this Agreement in accordance
with its terms, the Company and Parent shall confer on a regular and frequent
basis to report operational matters and the general status of ongoing operations
of, respectively, the Company and Parent.
(c) No information or knowledge obtained in any investigation after the
Execution Date pursuant to this Section 6.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger; provided, however, that
each party hereto shall promptly inform the other party hereto of any such
information or knowledge obtained in its investigation which would reasonably be
likely to have a Parent or a Company Material Adverse Effect. Additionally,
during the period from the date hereof and prior to the Effective Time or the
earlier termination of this Agreement in accordance with its terms, each party
shall promptly notify the other party hereto in writing of:
(i) the discovery of any event, condition, fact or circumstance
which causes, caused, constitutes or constituted a breach of any representation
or warranty made by Parent or the Company in this Agreement or any other
agreement contemplated hereby;
(ii) any material breach of any covenant or obligation by Parent or
the Company; and
(iii) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the covenants or conditions set forth in this
Article VI or Article VII impossible or unlikely.
(d) If any event, condition, fact or circumstances that is required to be
disclosed pursuant to Section 6.1(c) requires any material change in,
respectively, the Company Disclosure Schedule or the Parent Disclosure Schedule,
or if any such event, condition, fact or circumstance would require such a
change assuming the Company Disclosure Schedule or the Parent Disclosure
Schedule, as the case may be, were dated as of the date of the occurrence,
existence or discovery of such event, condition, fact or circumstances, then the
Company or Parent, as applicable shall promptly deliver to the other party an
update to its Disclosure Schedule specifying such change (a "DISCLOSURE SCHEDULE
UPDATE").
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(e) The Company shall provide Parent and its accountants, legal counsel
and other representatives reasonable access, during normal business hours during
the period prior to the Effective Time, to: (i) all Company Books and Records,
including for the purpose of auditing or preparing for the audit of the
Company's financial statements as required by applicable SEC rules and
regulations and (ii) all of the Company's Tax Returns and other records and work
papers relating to Taxes, provided that Parent contacts the Company's Chief
Financial Officer prior to contacting any other employee of the Company, and
shall provide to Parent and its representatives the following information
promptly upon the request of Parent: (A) the types of Tax Returns being filed by
the Company in each taxing jurisdiction, (B) the year of the commencement of the
filing of each such type of Tax Return, (C) all closed years with respect to
each such type of Tax Return filed in each jurisdiction, (D) all material Tax
elections filed in each jurisdiction by the Company, (E) any deferred
inter-company gain with respect to transactions to which the Company has been a
party, and (F) receipts for any Taxes.
Section 6.2 No Dissenters' Rights. Each of the Stockholders covenant and
agree that: (a) they shall use their good faith best efforts to take all actions
to vote for or otherwise approve of the Merger prior to the Closing (both as
stockholders and directors of the Company) and (b) neither of the Stockholders
will exercise any dissenter's rights under Delaware Law.
Section 6.3 Confidentiality. Each of the Company, Parent and the
Stockholders acknowledges that they: (i) have received material, nonpublic
information of the other parties ("CONFIDENTIAL INFORMATION"), (ii) shall retain
and hold the Confidential Information of the other parties in confidence and,
except as required by Law or judicial or other process of a Governmental Entity,
not disclose or reveal any such Confidential Information to others or permit the
disclosure thereof, and (iii) shall return all Confidential Information of the
other parties in the event that this Agreement is terminated. The Company and
the Stockholders acknowledge and agree that a purpose of the confidentiality
provisions of this Section 6.3 is so that Parent may be in compliance with
Regulation FD promulgated by the SEC.
Section 6.4 Public Disclosure. The Company and Parent shall consult with
each other before issuing any press releases or otherwise make any public
statements or make any other public (or non-confidential) disclosures (whether
or not in response to an inquiry) regarding the terms of this Agreement and the
transactions contemplated hereby, and neither shall issue a press release or
make any statements or disclosures without the prior written approval of the
other (which consent shall not be unreasonably withheld), except as may be
required by Law.
Section 6.5 Consents; Cooperation.
(a) Each of Parent and the Company shall promptly apply for or otherwise
seek, and use commercially reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger. The
Company and Parent shall each use their respective reasonable best efforts to
obtain all necessary consents, waivers and approvals under any of their
respective material contracts in connection with the Merger (including, without
limitation, under the Company IP Agreements) to the extent required under such
contracts.
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(b) The Company shall furnish Parent, on or prior to the Closing Date,
with evidence satisfactory to it of the consent or approval of those Persons
whose consent or approval shall be required in connection with the Merger under
the applicable contracts of the Company set forth, or required to be set forth,
on the Company Disclosure Schedule.
Section 6.6 Legal Requirements. Each of the Company, the Stockholders and
Parent shall take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement and will promptly cooperate
with and furnish information to any party hereto necessary in connection with
any such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate with the other
parties hereto in obtaining) any consent, approval, order or authorization of,
or any registration, declaration or filing with, any Governmental Entity or
other Person, required to be obtained or made in connection with the taking of
any action contemplated by this Agreement.
Section 6.7 Treatment as Reorganization. Neither the Company nor Parent
shall take any action prior to or following the Closing that would cause the
merger to fail to qualify as a tax-deferred "reorganization" within the meaning
of Section 368 of the Code.
Section 6.8 Listing of Additional Shares. To the extent required and prior
to the public registration thereof, Parent shall cause all shares of Parent
Common Stock underlying the Parent Preferred to be issued pursuant to the terms
of this Agreement to be approved for listing on NASDAQ.
Section 6.9 Location of Arius. The parties agree that, following the
Effective Time, the Surviving Corporation shall remain located in the Research
Triangle Park area of Raleigh, North Carolina.
Section 6.10 Financing of the Surviving Corporation. Following the
Closing, Parent shall use not less than $2,000,000 of funds raised from the
Parent Financing to finance the operations of the Surviving Corporation
(including, without limitation, all Development Activities) in accordance with a
business plan reasonably agreed to by the Stockholders and Parent and delivered
by the Company to Parent as of the Execution Date (the "BUSINESS PLAN") (it
being understood that such Business Plan may be amended or modified prior to, as
of or following the Closing Date with the approval of Parent and Xxxxx).
Section 6.11 Atrix License Payment. By no later than as required pursuant
to the Atrix License (as defined in Section 7.3(d) below), Parent shall
contribute to the Surviving Corporation cash in the amount of not less than
$1,000,000 to be used by the Surviving Corporation to make that certain
$1,000,000 payment required under the Atrix License.
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Section 6.12 Board Observation and Nomination Rights. After the Effective
Time: (i) until the conditions precedent set forth in the Certificate of
Designations for conversion of all shares of Parent Preferred Stock into shares
of Parent Common Stock have been satisfied, Xxxxx shall be granted the right to
observe and participate (but not vote) in all meetings of the Parent's Board of
Directors as a board observer and (ii) following the time when the conditions
precedent set forth in the Certificate of Designations for conversion of all
shares of Parent Preferred Stock into shares of Parent Common Stock have been
satisfied, the Stockholders, acting jointly and severally, shall have the right,
in connection with each annual meeting of Parent's stockholders, to nominate,
and the Company shall include such nomination in its proxy materials with a
recommendation that the Company's stockholders vote for the election of, one (1)
individual (who shall be Xxxxx) to serve on Parent's Board of Directors, it
being understood and agreed that that such nomination shall in all instances be
subject to the affirmative vote of the holder's of the then outstanding shares
of Parent Common Stock.
Section 6.13 Non-Competition.
(a) In consideration of the benefits to inure to them as a result of the
Merger (including, without limitation, their receipt of the Parent Preferred
Stock), and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each of Xxxxx and Xxxx respectively
(and not jointly) agree that, during the Non-Competition Period, they each shall
not, anywhere in the world, own, manage, operate, control, consult for, be an
officer or director of, work for, or be employed in any capacity by any company,
eleemosynary institution or any other business, entity, agency or organization
(or a discrete business unit within any such entity) whose primary business
purpose is to engage in a Competitive Activity; provided, however, that during
Non-Competition Period, Xxxxx and Xxxx may serve as a director, consultant or
scientific advisor of such an entity that is either a Company licensee, or, for
non-licensees, in such capacity as the Company's Board of Directors has granted
them written permission, such permission not to be unreasonably withheld.
(b) For purposes of this Agreement, the term "NON-COMPETITION PERIOD"
shall mean, with respect to each of Xxxxx and Xxxx, respectively, from the date
hereof until the date on which they are no longer employed by the Company or any
subsidiary thereof or serve as a director of the Company or any Subsidiary
thereof plus two (2) years after such date. In the event that a court of
competant jurisdiction determines that Xxxxx or Xxxx, as the case may be,
improperly competes with Parent, the period during which he engages in such
competition shall not be counted in determining the duration of the two (2) year
non-compete restriction
(c) For purposes of this Agreement, the term "COMPETITIVE ACTIVITY" shall
mean the development, manufacture, sale, license, packaging or marketing of the
following technologies (or products incorporating such technologies): (i) (A)
anionic phospholipid delivery technology or (B) buccal delivery technology, in
each case for the delivery of drugs or nutrients for human or non-human
applications and (ii) any technology or product which Xxxxx or Xxxx,
respectively and as the case may be, were actively and directly participating in
on behalf of Parent or any subsidiary of Parent or joint venture in which Parent
is participating at the time of termination (it being understood, for the
avoidance of doubt, that the words "actively and directly" shall not include
Xxxxx or Xxxx'x actions in a merely supervisory capacity). Section
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6.14 Certain Stockholder Approval. Parent shall use best efforts to
obtain, at the next annual meeting of Parent's stockholders following the
Closing (and at each special or annual meeting of Parent thereafter until
approval is gained) the approval of Parent's stockholders necessary to permit
the issuance by Parent of shares of Parent Common Stock upon conversion of the
Parent Preferred Stock that would result in the total aggregate number of shares
of Parent Common Stock issued or deemed to be issued at any time to any holder
or all holders of Parent Preferred Stock exceeding 19.99% of the issued and
outstanding shares of Common Stock immediately prior to the Effective Time.
Section 6.15 Further Assurances. Parent, Merger Sub, the Company and the
Stockholders shall use commercially reasonable best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the reasonable
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby. Without limiting the generality of the
foregoing, following the Effective Time, the Stockholders shall file with the
SEC all appropriate forms required under Section 16 of the Exchange Act.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement, each Other Document to which such party is a party or
signatory, the Merger and the transactions contemplated hereby and thereby shall
be subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (which has
jurisdiction over the Company or Parent), seeking any of the foregoing be
pending; nor shall there be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal. In the event an injunction or
other order shall have been issued, each party agrees to use its reasonable
efforts to have such injunction or other order lifted.
(b) Governmental Approval. Parent, Merger Sub and the Company shall have
timely obtained from each Governmental Entity all approvals, waivers and
consents, if any, necessary for consummation of or in connection with the Merger
and the several transactions contemplated hereby, including but not limited to
such approvals, waivers and consents as may be required under the Securities
Act, under state blue sky Laws.
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(c) Parent Financing. Prior to the Closing, Parent shall have obtained
financing (by either license, debt or equity financing or other financing) in an
amount equal no less than $6,000,000 in one or more related or unrelated
transactions and on terms reasonably satisfactory to Parent (such financing, the
"PARENT FINANCING").
(d) Atrix License. (i) The Company shall have executed and delivered to
Parent a waiver agreement relating to certain terms and conditions contained in
that certain license agreement between the Company and Atrix regarding the
BioErodible MucoAdhesive (BEMA) technology (the "ATRIX LICENSE"), which waiver
agreement shall be in the form agreed to by Parent and the Company and (ii)
except as modified by such waiver agreement, the Atrix License shall be
unterminated and unmodified by the parties thereto and in full force and effect.
(e) Reorganization. The Company and Parent shall be reasonably satisfied,
in their respective discretions, that the Merger constitutions a tax-deferred
reorganization under Section 368(a) of the Code.
Section 7.2 Additional Conditions to Obligations of the Company and the
Stockholders. The obligations of the Company and the Stockholders to consummate
and effect this Agreement, each Other Document to which they are a party or
signatory, the Merger and the transactions contemplated hereby and thereby shall
be subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by the Company:
(a) Representations, Warranties and Covenants. Except: (i) for the impact
on Parent of the Parent Financing and (ii) as disclosed in the Parent Disclosure
Schedule dated as of the Execution Date (as amended by any Disclosure Schedule
Update): (i) the representations and warranties of Parent in this Agreement
shall be true and correct in all material respects on and as of the Effective
Time as though such representations and warranties were made on and as of such
time or, in the case of representations and warranties of Parent which speak
specifically as of an earlier date, shall be true and correct as of such earlier
date, except in each case, (A) for changes contemplated by the Agreement, or (B)
where the failure to be true and correct has not had, and would not reasonably
be expected to result in, a Parent Material Adverse Effect and (ii) Parent shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by Parent as of the Effective Time.
(b) Parent Officer's Certificate. At the Closing, the Company and the
Stockholders shall have received a duly executed certificate on behalf of Parent
by an authorized officer to the effect set forth in Section 7.2(a).
(c) Parent Secretary Certificate. At the Closing, the Company and the
Stockholders shall have received a duly executed certificate from the Secretary
of Parent and Merger Sub with respect to: (i) the certificate of incorporation,
as certified by the Secretary of State of Delaware as of a recent date, and
bylaws of such entities, (ii) resolutions of the board of directors of such
entities with respect to the authorizations of this Agreement and the other
agreements contemplated hereby, (iii) a certificate of existence and good
standing as of a recent date from the Secretary of State of the State of
Delaware and (iv) the incumbency of the executing officers of such entities.
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(d) Payment on Company Notes. At or prior to the Closing, Parent shall pay
to each of Xxxxx and Xxxx an amount in cash equal to $25,552.87 and $28,638.73,
respectively, representing one hundred percent (100%) of the outstanding
principal and interest due under the Company Notes.
(e) Certificate of Designations. At or prior to the Closing, the
Certificate of Designations of the Parent Preferred Stock, in the form attached
hereto as Exhibit B (the "CERTIFICATE OF DESIGNATIONS"), shall have been duly
filed with and accepted by the Secretary of State of Delaware.
(f) Preferred Stock Certificates. At the Closing, the stockholders of the
Company listed on Schedule 3.2(a) to the Company Disclosure Schedule and the
Stockholders shall have received share certificates for an appropriate amount of
shares of Parent Preferred Stock.
(g) Registration Right Agreement. At the Closing, Parent shall have
executed and delivered to the Stockholders a registration rights agreement in
the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT").
(h) Employment Agreements. Parent shall have duly executed and delivered
to each of Xxxxx and Xxxx an employment agreement between Parent and such
individuals, in each case substantially in the form attached hereto as Exhibit D
(the "EMPLOYMENT AGREEMENTS").
(i) Parent Counsel Legal Opinion. The Company shall have been furnished
with the favorable opinion of Ellenoff Xxxxxxxx & Schole LLP, counsel to Parent,
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit E.
(j) Voting Agreement. At the Closing, certain stockholders of Parent shall
have duly executed and delivered to the Stockholders a Voting Agreement, to be
executed by such Parent stockholders, which agreement shall be substantially in
the form attached hereto as Exhibit G (the "PARENT STOCKHOLDER VOTING
AGREEMENT").
(k) BSP Waiver. At the Closing, Parent shall have delivered to the Company
a written waiver, in the form mutually acceptable to the Company and Parent, of
Biotech Specialty Partners, LLC ("BSP"), wherein BSP shall have waived all of
its rights under that certain agreement dated November 30, 2000, between BSP and
Parent with respect to any and all current or future products of the Company.
Section 7.3 Additional Conditions to the Obligations of Parent. The
obligations of Parent to consummate and effect Agreement, each Other Document to
which it is a part or signatory, the Merger and the transactions contemplated
hereby and thereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Parent:
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(a) Representations, Warranties and Covenants. Except as disclosed in the
Company Disclosure Schedule dated as of the Execution Date (as amended by any
Disclosure Schedule Update): (i) the representations and warranties of the
Company in this Agreement shall be true and correct in all material respects on
and as of the Effective Time as though such representations and warranties were
made on and as of such time or, in the case of representations and warranties of
the Company which speak specifically as of an earlier date, shall be true and
correct as of such earlier date, except in each case, (A) for changes
contemplated by the Agreement, or (B) where the failure to be true and correct
has not had, and would not reasonably be expected to result in, a Company
Material Adverse Effect and (ii) the Company shall have performed and complied
in all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by the Company as of the
Effective Time.
(b) Company Officer's Certificate. Parent shall have been provided with a
certificate executed on behalf of the Company by an authorized officer to the
effect set forth in Section 7.3(a).
(c) Company Secretary Certificate. Parent shall have received a duly
executed certificate from the Secretary of the Company with respect to: (i) the
certificate of incorporation, as certified by the Secretary of State of Delaware
as of a recent date, and bylaws of the Company, (ii) resolutions of the board of
directors of the Company with respect to the authorizations of this Agreement
and the other agreements contemplated hereby, (iii) a certificate of existence
and good standing as of a recent date from the Secretary of State of the State
of Delaware and (iv) the incumbency of the executing officers of the Company.
(d) Legal Opinion. Parent shall have been furnished with the favorable
opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, dated as of the Closing Date,
counsel to the Company, substantially in the form attached hereto as Exhibit F.
(e) Acceleration and Exercise of Options. At the Closing, Parent shall
have received satisfactory written evidence that the all Company Options
outstanding as of the Execution Date have been exercised and are no longer
outstanding as of the Closing Date.
(f) Stockholder Voting Agreement. At the Closing, the Stockholders shall
have duly executed and delivered to Parent a Voting Agreement, to be executed by
the Stockholders, which agreement shall be substantially in the form attached
hereto as Exhibit H (the "STOCKHOLDER VOTING AGREEMENT").
(g) Certificate of Designations. As of or prior to the Closing, the
Certificate of Designations shall have been duly accepted by the Secretary of
State of Delaware.
(h) Employment Agreements. At the Closing, each of Xxxxx and Finn shall
have duly executed and delivered to Parent their respective Employment
Agreements.
(i) Registration Rights Agreement. At the Closing, the Stockholders shall
have duly executed and delivered to Parent the Registration Rights Agreement.
40
(j) Resignations and Terminations. Effective immediately prior to the
Effective Time: (i) all current officers and directors of the Company shall have
resigned in writing and delivered such written resignations to Parent and (ii)
Xxxxx and Xxxx, respectively, and the Company shall have effectively terminated
the respective Company employment agreements of Xxxxx and Xxxx set forth on
Schedule 3.15(a).
(k) Company Common Stock. The holders of all shares of Company Common
Stock shall have delivered original stock certificates representing such shares
to Parent.
(l) FIRPTA. The Company shall, on or prior to the Closing Date, have
provided Parent with a properly executed FIRPTA Notification Letter, in the form
reasonably agreed to by the parties, which states that shares of the Company
Capital Stock do not constitute "United States real property interests" under
Section 897(c) of the Code, for purposes of satisfying Parent's obligations
under Treasury Regulation Section 2.1445-2(c)(3). In addition, simultaneously
with delivery of such Notification Letter, the Company shall have provided to
Parent, as agent for the Company, a form of notice to the Internal Revenue
Service in accordance with the requirements of Treasury Regulation Section
2.897-2(h)(2), along with written authorization for Parent to deliver such
notice form to the Internal Revenue Service on behalf of the Company upon the
Closing of the Merger.
(m) Company Material Adverse Effect. No Company Material Adverse Effect
shall have occurred since July 31, 2004.
(n) Third Party Consents. The Company shall have obtained all necessary
consents from third parties, including, without limitation, a consent from
Reckitt Benckiser Healthcare (UK) Limited.
(o) Instruments and Possessions. In order to effect the Merger, the
Company and the Stockholders shall have executed and/or delivered to Parent: (i)
such changes relating to the bank accounts and safe deposit boxes of the Company
as are being transferred to the Surviving Corporation and (ii) such other
certificates, documents, instruments and agreements as Parent shall deem
necessary in its reasonable discretion in order to effectuate the Merger and the
other transactions contemplated herein, in form and substance reasonably
satisfactory to Parent.
ARTICLE VIII.
TERMINATION
Section 8.1 Termination. At any time prior to the Effective Time, and
subject to Section 8.3 below, this Agreement may be terminated:
(a) by mutual written consent duly authorized by each party's Board of
Directors;
(b) After August 24, 2004, by either Parent or the Company, if the Closing
shall not have occurred on or before such date (provided, a later date may be
agreed upon in writing by the parties hereto, and provided further that the
right to terminate this Agreement under this Section 8.1(a)(ii) shall not be
available to any party whose action or failure to act has been the cause of the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement);
41
(c) by Parent, if: (A) the Company shall materially breach any
representation, warranty, obligation or agreement hereunder (other than a breach
which has not had, and would not reasonably be expected to result in, a Company
Material Adverse Effect and such breach shall not have been cured within five
(5) business days of receipt by the Company of written notice of such breach
(describing the details of such breach); provided, however, that the right to
terminate this Agreement by Parent under this Section 8.1(a)(iii)(A) shall not
be available to Parent where Parent is at that time in breach of this Agreement,
which breach has had, or would reasonably be expected to result in, a Parent
Material Adverse Effect; or (B) if one or more of the conditions to Parent's
obligation to consummate the transactions contemplated hereby specified in
Sections 7.1 or 7.3 hereof is not satisfied or fails to occur;
(d) by the Company, if: (A) Parent shall materially breach any
representation, warranty, obligation or agreement hereunder (other than a breach
which has not had, and would not reasonably be expected to result in, a Parent
Material Adverse Effect and such breach shall not have been cured within five
(5) business days of receipt by Parent of written notice of such breach
(describing the details of such breach); provided, however, that the right to
terminate this Agreement by Parent under this Section 8.1(a)(iv)(A) shall not be
available to the Company where Parent is at that time in breach of this
Agreement, which breach has had, or would reasonably be expected to result in, a
Company Material Adverse Effect, or (B) if one or more of the conditions to the
Company's obligation to consummate the transactions contemplated hereby
specified in Sections 7.1 or 7.2 hereof is not satisfied or fails to occur; or
(e) by either Parent or the Company if: (A) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable, or (B) if any required
approval of the stockholders of the Company shall not have been obtained by
reason of the failure to obtain the required vote upon a vote held at a duly
held meeting of stockholders or at any adjournment thereof.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become null
and void and there shall be no liability or obligation on the part of Parent,
Merger Sub, the Company or the Stockholders or their respective officers,
directors, stockholders or Affiliates, except to the extent that such
termination results from the willful breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement.
Section 8.3 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisers, accountants and legal counsel) shall be paid by the party incurring
such expense.
42
ARTICLE IX.
SURVIVAL; INDEMNIFICATION
Section 9.1 Survival. Unless satisfied or terminated prior to the
Effective Time in accordance with Article XIII hereof, the agreements and
covenants contained in this Agreement shall survive the Closing Date without
limitation. The representations and warranties contained in this Agreement shall
survive the Closing Date for a period of twenty-four (24) months, except that
any representation or warranty of the Company and the Stockholders contained in
Section 3.12 (Taxes) shall survive until the expiration of one (1) year after
the expiration of the applicable statute of limitations.
Section 9.2 Obligation of the Company and the Stockholders to Indemnify.
(a) Prior to the Effective Time, the Company and the Stockholders agree,
jointly and severally, and after the Effective Time, the Stockholders, severally
and pro rata for each of them in proportion the percentage of the aggregate
shares of Parent Preferred Stock received by them in connection with the Merger,
agree to indemnify, defend and hold harmless Parent and the Surviving
Corporation (and their respective directors, officers, employees, affiliates,
stockholders, agents, attorneys, successors and assigns) from and against all
losses, liabilities, damages, deficiencies, costs or expenses (including
interest, penalties and reasonable attorneys' and consultants' fees and
disbursements) (collectively, "LOSSES") based upon, arising out of or otherwise
in respect of any: (i) inaccuracy in any representation or warranty of the
Company and the Stockholders contained in this Agreement, the Exhibits hereto or
in the Company Disclosure Schedules or (ii) breach by the Company or the
Stockholders of any covenant or agreement contained in this Agreement.
(b) Parent hereby agrees that in pursuing any claim for Losses for any
breach by the Company or the Stockholders under Section 9.2(a) hereof, Parent
shall only be entitled to seek satisfaction for such claim for Losses from the
Stockholders in the amounts set forth in Section 9.4(b) below and solely and
exclusively from the following sources and in the following priority:
(i) First, from the shares of Parent Preferred Stock received
in the Merger or shares of Parent Common Stock received upon conversion thereof
(it being understood, for the avoidance of doubt, that if, at the time of the
applicable Loss, no shares of Parent Preferred Stock have been converted or
sold, Parent's only recourse for Losses shall be against the shares of Parent
Preferred Stock held by the Stockholders and any distributions received thereon
or proceeds received therfrom); and
(ii) Second, from the cash or other proceeds received by the
Stockholders from distributions received on, or any future sales by them of,
shares of Parent Preferred Stock received in the Merger or shares of Parent
Common Stock underlying such shares of Parent Preferred Stock.
Section 9.3 Obligation of Parent to Indemnify. Prior to the Effective
Time, Parent agrees to indemnify, defend and hold harmless the Stockholders and
the Company (and its directors, officers, employees, affiliates, stockholders,
agents, attorneys, successors and assigns), and after the Effective Time, the
Stockholders only, from and against any Losses based upon, arising out of or
otherwise in respect of any: (i) inaccuracy in any representation or warranty of
Parent contained in this Agreement or (ii) breach by Parent of any covenant or
agreement contained in this Agreement.
43
Section 9.4 Limitations on Liability. Notwithstanding anything in this
Agreement to the contrary:
(a) In no event shall any party hereto, or any direct or indirect
stockholder, beneficiary, owner or Affiliate thereof, or any officer, director,
employee, trustee, or agent of any of the foregoing or any Affiliate or
controlling person thereof, be liable to any Person, in contract, tort or
otherwise for any punitive or exemplary Losses arising from or relating to this
Agreement.
(b) In no event shall the Stockholders or Parent be entitled to recover
any Losses from one another under this Agreement in an amount in excess of
$3,500,000 in the aggregate; provided, however, that to the extent that the
shares of Parent Preferred Stock or Parent Common Stock underlying the Parent
Preferred Stock are sold by the Stockholders for, or the Stockholders receive
proceeds by way of dividend or distributions on the shares of Parent Preferred
Stock or Parent Common Stock underlying the Parent Preferred Stock, in excess of
$3,500,000 in the aggregate, Parent and the Stockholders shall be entitled to
recover from one another for Losses of $3,500,000 plus such excess amount, in
each case up to no more than a maximum amount of $7,000,000.
(c) The indemnification provisions contained in this Article IX shall be
the sole and exclusive remedies of the Stockholders and Parent against each
other with respect to any and all causes of action related to this Agreement;
provided, however, that it is expressly understood and agreed the foregoing
limitations shall not be applicable with respect to non-monetary remedies
available to the parties relating to breaches of any agreement or covenant of,
respectively, the Stockholders and Parent contained in this Agreement, for which
any and all non-monetary remedies shall be available to the parties.
Section 9.5 Notice and Opportunity to Defend.
(a) Promptly after receipt by any Person entitled to indemnity under this
Agreement (an "INDEMNITEE") of notice of any demand, claim or circumstances
which, with the lapse of time, would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "ASSERTED LIABILITY") that may result in a Loss, the
Indemnitee shall give written notice thereof (a "CLAIMS NOTICE") to any other
party (or parties) who is or may be obligated to provide indemnification
pursuant to Section 9.2 or 9.3 (the "INDEMNIFYING PARTY"). The Claims Notice
shall describe the Asserted Liability in reasonable detail and shall indicate
the amount (estimated, if necessary and to the extent feasible) of the Loss that
has been or may be suffered by the Indemnitee.
44
(b) The Indemnifying Party may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within
thirty (30) days after the date the Claims Notice is given (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability, provided, however, that the Indemnifying Party may settle or
compromise any Asserted Liability without the consent of the Indemnitee so long
as such settlement or compromise releases the Indemnitee and does not include
any admission or statement of fault against the Indemnitee. If the Indemnifying
Party elects not to compromise or defend the Asserted Liability, fails to notify
the Indemnitee of its election as herein provided or contests its obligation to
indemnify under this Agreement, the Indemnitee may pay, compromise or defend
such Asserted Liability and all reasonable expenses incurred by the Indemnitee
in defending or compromising such Asserted Liability, all amounts required to be
paid in connection with any such Asserted Liability pursuant to the
determination of any court, governmental or regulatory body or arbitrator, and
amounts required to be paid in connection with any compromise or settlement
consented to by the Indemnitee, shall be borne by the Indemnifying Party. Except
as otherwise provided in the immediately preceding sentence, the Indemnitee may
not settle or compromise any claim over the objection of the Indemnifying Party.
In any event, the Indemnitee and the Indemnifying Party may participate, at
their own expense, in (but the Indemnitee may not control) the defense of such
Asserted Liability. If the Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to the Indemnifying Party any books, records or
other documents within its control that are necessary or appropriate for such
defense.
ARTICLE X.
GENERAL PROVISIONS
Section 10.1 Amendment. This Agreement may be amended at any time by
execution of an instrument in writing signed on behalf of each of the parties
hereto.
Section 10.2 Extension; Waiver. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of the other
parties contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party granting such waiver or extension and
only for the specific instance for which such waiver or extension was granted.
Section 10.3 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given or made hereunder shall be in
writing and shall be deemed to have been duly given and received to or by the
party to whom the same is so given or made: (a) if delivered by hand, on the day
it is so delivered against receipt, (b) if mailed via the United States mail,
certified first class mail, postage prepaid, return receipt requested, on the
fifth (5th) business days after it is mailed, (c) if sent by a nationally
recognized overnight courier, on the business day after it is sent or (d) if
sent by facsimile transmission, on the day it is so delivered (with confirmation
of receipt), at the address or fax number of such party as set forth below,
which address and fax number may be changed by notice to the other party hereto
duly given as set forth herein):
45
if to Parent or Merger Sub, to:
BioDelivery Sciences International, Inc.
UMDNJ-New Jersey Medical School
000 Xxxxx Xxxxxx Xxxxxx, Administrative Building 4
Xxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. X'Xxxxxxx, Xx.
with a copy to:
Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
if to the Company or the Stockholders, to:
Arius Pharmaceuticals, Inc.
0000 Xxxxx Xxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxx Xxxxx
with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Section 10.4 Certain Interpretive Conventions.
(a) In this Agreement, any reference to any event, change, condition or
effect being "MATERIAL" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity and
its subsidiaries taken as a whole.
46
(b) In this Agreement, any reference to a party's "KNOWLEDGE" means the
actual knowledge of each of such party's executive officers and directors,
provided it shall be assumed that such executive officers and directors shall
have made reasonable and customary inquiry of the matters presented.
(c) In this Agreement, any reference to a party conducting its business or
other affairs or taking any action in the "ORDINARY COURSE OF BUSINESS" means
that such an action taken by or on behalf of such party shall not be deemed to
have been taken in the "ordinary course of business" unless such action is taken
in the ordinary course of such party's normal day to day operations and is
similar in nature and magnitude to actions customarily taken, without any
separate or special authorization.
(d) The words "INCLUDE," "INCLUDES" and "INCLUDING" when used in this
Agreement shall be deemed in each case to be followed by the words "without
limitation."
(e) The phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
(f) The phrases "THE DATE OF THIS AGREEMENT", "THE DATE HEREOF" and terms
of similar import, unless the context otherwise requires, shall be deemed to
refer to the Execution Date.
(g) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated.
(h) The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.5 Entire Agreement. This Agreement, together with the documents
and instruments and other agreements specifically referred to herein or
delivered pursuant hereto, including the Exhibits, the Company Disclosure
Schedule and the Parent Disclosure Schedule, constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and is not intended to confer upon any
other Person any rights or remedies hereunder.
Section 10.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
47
Section 10.7 Remedies Cumulative. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
Section 10.8 Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without reference to such state's principles of conflicts of law. Each of the
parties hereto irrevocably consents to the jurisdiction of any federal or state
court located within the State of Delaware, in connection with any matter based
upon or arising out of this Agreement or the matters contemplated herein, agrees
that process may be served upon them in any manner authorized by the laws of the
State of Delaware for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process. THE PARTIES HERETO IRREVOCABLY WAIVE THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE MERGER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.9 Attorneys' Fees. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a sum for
its attorneys' fees and all other costs and expenses incurred in such action or
suit.
Section 10.10 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any Law of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
Section 10.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of Law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void.
Section 10.12 Successors and Assigns. This Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
Section 10.13 Counterparts; Facsimile Delivery. This Agreement may be
executed in one or more counterparts and delivered by facsimile, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
48
[This Page Intentionally Left Blank]
[Signature Page Follows]
49
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Stockholders,
have each caused this Agreement to be executed and delivered by their respective
officers thereunto duly authorized, all as of the date first written above.
BIODELIVERY SCIENCES INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. X'Xxxxxxx, Xx.
----------------------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: Chief Executive Officer and President
ARIUS ACQUISITION CORP.
By: /s/ Xxxxxxx X. X'Xxxxxxx, Xx.
----------------------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: Chief Executive Officer and President
ARIUS PHARMACEUTICALS, INC.
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Name: Xxxx X. Xxxxx
Title: President and Chief Executive Officer
STOCKHOLDERS:
/s/ Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
/s/ Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION]
S-1
SCHEDULE A
DEFINED TERMS
When used in this Agreement, the following capitalized words and phrases
shall have the meanings set forth below.
"AFFILIATE" or "AFFILIATES" of a specified Person is a Person or Persons
that: (i) directly or indirectly, through one or more intermediaries, Controls,
is Controlled by or is under common Control with the Person specified or (ii) in
the case of a natural person, is a spouse, linear ancestor or linear descendant
of any such specified person or (iii) in the case of a natural person, is a
legal representative or trustee of any such specified persons or (iv) is an
officer, director, trustee, employee, stockholder, member, partner, principal or
trust for the benefit of any entity or Person referred to in the preceding
clauses (i), (ii) or (iii).
"ATRIX" shall mean Atrix Laboratories, Inc.
"BOOKS AND RECORDS" shall mean all books and records produced by or in the
possession of the Company or its accountants, attorneys or advisors pertaining
to the Company, including, without limitation, those Books and Records
pertaining to: (i) the Company Intellectual Property, (ii) the business of the
Company, (iii) Persons in privity of contract with the Company, (iv) the
products, products in development, proposed products, customers, distributors
and suppliers of the Company, (v) minutes of stockholder and directors meetings,
(vi) the Company Capital Stock and (vii) all financial statements, ledgers,
spreadsheets, work papers, tax returns and other information relevant to the
financial condition of the Company or such returns.
"COMPANY CAPITAL STOCK" shall mean all outstanding shares of the Company's
Common Stock, all outstanding shares of Company Convertible Securities, all
Company Options and all outstanding shares of any other capital stock of the
Company immediately prior to the Effective Time.
"COMPANY COMMON STOCK" shall mean shares of the common stock, par value
$0.01 per share, of the Company.
"COMPANY CONVERTIBLE SECURITIES" shall mean any and all convertible
securities of any type or any other rights to purchase or otherwise acquire
shares of the Company Capital Stock, whether or not presently exercisable or
subject to additional conditions prior to exercise.
"COMPANY DISCLOSURE SCHEDULE" shall mean a separate disclosure schedule of
the Company, dated as of the Execution Date and delivered by the Company to
Parent prior to the execution and delivery of this Agreement and referring by
section number to the representations and warranties in this Agreement, as the
same may be amended by any Disclosure Schedule Update.
A-1
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change, event or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of the Company; provided, however, that any
adverse change, effect, event, occurrence, state of facts or development
attributable to conditions affecting the industries as a whole in which the
Company participates, the U.S. economy as a whole or the foreign economies as a
whole in any locations where the Company has material operations or sales shall
not be taken into account in determining whether there has been or will be a
Company Material Adverse Effect.
"COMPANY NOTES" shall mean those certain loans previously and equally made
by the Stockholders to the Company in the aggregate amount as of the Effective
Date of approximately $60,000.
"COMPANY OPTIONS" shall mean any and all warrants, options or other rights
to purchase or otherwise acquire shares of the Company Capital Stock, whether or
not presently exercisable or subject to additional conditions prior to exercise,
under and pursuant to the Company's 2003 Stock Plan or any other incentive plan
or agreement adopted or entered into by the Company on or prior to the Effective
Date (the "COMPANY STOCK OPTION PLAN").
"CONTROL" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through: (i) the ownership of voting shares (ii) general partnership or
managing member interests (iii) common directors or trustees or (iv) by contract
or otherwise.
"DEFINED BENEFIT PLAN" shall mean either a plan described in Section 3(35)
of ERISA or a plan subject to the minimum funding standards set forth in Section
302 of ERISA and Section 412 of the Code.
"ENVIRONMENTAL APPROVALS" shall mean all permits, licenses, authorizations
and approvals required under Environmental Law with respect to the operation or
conduct of its business or the ownership or operation of the Property and
Facilities.
"ENVIRONMENTAL CLAIM" shall mean all claims or causes of actions, whether
or not asserted, including but not limited to claims by any person or
Governmental Entity or other third party, alleging potential liability or
responsibility for violation of any Environmental Law or any Environmental
Approval or for threat or injury to the environment, health or safety, personal
injury (including sickness, disease or death) or property or natural resource
damage, or otherwise alleging liability or responsibility for damages (punitive
or otherwise), investigation, cleanup, removal, remedial or response action or
costs, contribution, restitution, administrative civil or criminal penalties,
injunctive relief, or other type of relief, resulting from or based upon a
Pre-Existing Environmental Condition.
"ENVIRONMENTAL LAW" shall mean any statute, law (including common law),
treaty, ordinance, rule, regulation, code, policy, license, permit, consent,
approval, judgment, order, administrative order or decision, decree or
injunction of any Governmental Entity relating to the protection of human health
or the environment (including air, water, soil and natural resources), or the
generation, treatment, manufacturing, use, storage, handling, recycling,
presence, release, disposal, transportation or shipment of any Hazardous
Material.
A-2
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, and all
rules and regulations promulgated thereunder, each as amended from time to time.
"FACILITIES" shall mean all buildings and improvements on the Property.
"HAZARDOUS MATERIAL" shall mean any material, substance, waste, pollutant
or contaminant listed, defined, designated or classified as hazardous, toxic,
flammable, explosive, reactive, corrosive, infectious, carcinogenic, mutagenic
or radioactive or otherwise regulated by any Governmental Entity or under any
Environmental Law, including petroleum or petroleum products (including crude
oil) and any derivative or by-products thereof, natural gas, synthetic gas and
any mixtures thereof, or any substance that is or contains polychlorinated
biphenyls (PCB's), radon gas, urea formaldehyde, asbestos-containing materials
(ACM) or lead.
"INTELLECTUAL PROPERTY" shall mean:
(i) patents, applications for patents (including, without
limitation, divisions, continuations, continuations-in-part, reissues and
renewal applications), and any renewals, extensions, supplementary protection
certificates or reissues thereof, in any such jurisdiction; research and
development data (including without limitation the results of research into and
development of drug or biologic-based products and drug delivery systems),
formulae, know-how, proprietary processes, algorithms, models and methodologies,
technical information, designs, procedures, laboratory notebooks, trade secrets
and confidential information and rights in any domestic or foreign jurisdiction
to limit the use or disclosure thereof by any Person;
(ii) inventions, discoveries and biological materials, whether
patentable or not and whether or not reduced to practice, in any domestic or
foreign jurisdiction;
(iii) trademarks, service marks, trade names, brand names,
certification marks, designs, logos and slogans, domain names, commercial
symbols, business name registrations, domain names, trade dress and other
indications of origin and general intangibles of like nature, the goodwill
associated with the foregoing and registrations in any domestic or foreign
jurisdiction of, and applications in any such jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application;
(iv) registrations or applications for registration of copyrights in
any domestic or foreign jurisdiction, and any renewals or extensions thereof;
(v) writings and other works of authorship of any type (including
the content contained on any web site), whether copyrightable or not, in any
such jurisdiction; computer software (whether in source code or object code
form), databases, compilations and data; and
(vi) any other technology or intellectual property or proprietary or
other rights therein of any type or nature.
A-3
"LAW" or "LAWS" shall mean any foreign, federal, state or local law,
statute, order, rule, regulation, policy or guideline enacted, promulgated or
administered, or judgments, holdings, decisions or orders entered by, any
Governmental Entity.
"LIABILITIES" shall mean any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty, endorsement or
cause of action of or by any Person, absolute or contingent, accrued or
unaccrued, reserved or unreserved, due or to become due, liquidated or
unliquidated.
"LIENS" shall mean mortgages, pledges, claims, restrictions,
infringements, liens, charges, encumbrances and security interests and claims of
any kind or nature whatsoever.
"MEMBER OF THE CONTROLLED GROUP" shall mean each trade or business,
whether or not incorporated, that would be treated as a single employer with the
Company under Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the
Code.
"MULTIEMPLOYER PLAN" shall mean a plan described in Section 3(37) of
ERISA.
"PARENT COMMON STOCK" shall mean shares of the common stock of Parent, par
value $.001 per share.
"PARENT DISCLOSURE SCHEDULE" shall mean a separate disclosure schedule of
the Parent, dated as of the Execution Date and delivered by Parent to the
Company and the Stockholders prior to the execution and delivery of this
Agreement and referring by section number to the representations and warranties
in this Agreement, as the same may be amended by any Disclosure Schedule Update.
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change, event or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of Parent and its subsidiaries, taken as a
whole; provided, however, that any adverse change, effect, event, occurrence,
state of facts or development attributable to conditions affecting the
industries as a whole in which Parent and its subsidiaries participates, the
U.S. economy as a whole or the foreign economies as a whole in any locations
where the Parent or any of its subsidiaries has material operations or sales
shall not be taken into account in determining whether there has been or will be
a Parent Material Adverse Effect.
"PARENT PREFERRED STOCK" shall mean shares of the Series A Non-Voting
Convertible Preferred Stock of Parent, par value $.001 per share.
"PERSON" shall mean any individual or any foreign or domestic corporation,
general or limited partnership, limited liability company, limited liability
partnership, joint venture, any other business association or any trust or any
other entity.
A-4
"PRE-EXISTING ENVIRONMENTAL CONDITION" shall mean: (i) any presence or
Release of any Hazardous Material at, on, under, from or to the Property or
Facilities before or at Closing (and any migration therefrom, whether before or
after Closing); (ii) any presence, Release or threatened Release of any
Hazardous Material at, on, under, from or to any other location before or at
Closing (and any migration therefrom, whether before or after Closing); and
(iii) any other circumstances occurring before or at Closing forming the basis
of any actual or alleged violation of, or liability under, any Environmental Law
or any Environmental Approval.
"PROPERTY" shall mean all real property leased or owned by the Company or
its Affiliates or the Stockholders in connection with the Company, in each case
either currently or in the past.
"RELEASE" shall mean any releasing, spilling, leaking, pumping, pouring,
placing, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping into the environment, whether intentional or
unintentional, negligent or non-negligent, sudden or non-sudden, accidental or
non-accidental.
"SECURITIES ACT" shall mean the Securities Act of 1933, and all rules and
regulations promulgated thereunder, each as amended from time to time.
"TAX" (and, with correlative meaning, "TAXES" and "TAXABLE") means: (i)
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity responsible for the imposition of any such tax (domestic or
foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any Taxable period, and (iii) any liability for
the payment of any amounts of the type described in (i) or (ii) as a result of
being a transferee of or successor to any Person, or as a result of any express
or implied obligation to indemnify any other Person.
"TAX RETURN" shall mean any return, statement, report or form (including,
without limitation, estimated tax returns and reports, withholding tax returns
and reports and information reports and returns) required to be filed with
respect to Taxes.
A-5
CROSS-REFERENCE TABLE
The following capitalized terms are defined in the sections of this
Agreement indicated below:
---------------------------------------- ---------------------------------------
TERM SECTION
---------------------------------------- ---------------------------------------
Agreement Preamble
---------------------------------------- ---------------------------------------
Asserted Liability 9.4(a)
---------------------------------------- ---------------------------------------
Atrix License 7.1(d)
---------------------------------------- ---------------------------------------
BSP 7.2(k)
---------------------------------------- ---------------------------------------
Business Plan 6.10
---------------------------------------- ---------------------------------------
CERCLA 3.13(d)
---------------------------------------- ---------------------------------------
Certificate Designations 7.2(f)
---------------------------------------- ---------------------------------------
Certificate of Merger 2.2
---------------------------------------- ---------------------------------------
Claims Notice 9.4(a)
---------------------------------------- ---------------------------------------
Closing 2.2
---------------------------------------- ---------------------------------------
Closing Date 2.2
---------------------------------------- ---------------------------------------
Company Preamble
---------------------------------------- ---------------------------------------
Company Authorizations 3.8
---------------------------------------- ---------------------------------------
Company Financial Statement 3.4(a)
---------------------------------------- ---------------------------------------
Company Intellectual Property 3.10(a)
---------------------------------------- ---------------------------------------
Company IP Agreements 3.11(a)
---------------------------------------- ---------------------------------------
Company Products 3.11(a)
---------------------------------------- ---------------------------------------
Competitive Activity 6.13(c)
---------------------------------------- ---------------------------------------
Confidential Information 6.3
---------------------------------------- ---------------------------------------
Delaware Law 2.1
---------------------------------------- ---------------------------------------
Development Activities 3.11(a)
---------------------------------------- ---------------------------------------
Disclosure Schedule Update 6.1(d)
---------------------------------------- ---------------------------------------
Effective Time 2.2
---------------------------------------- ---------------------------------------
Employment Agreements 7.2(i)
---------------------------------------- ---------------------------------------
Execution Date Preamble
---------------------------------------- ---------------------------------------
A-6
---------------------------------------- ---------------------------------------
FDA 3.11(b)
---------------------------------------- ---------------------------------------
Xxxx Preamble
---------------------------------------- ---------------------------------------
Governmental Entity 3.3(c)
---------------------------------------- ---------------------------------------
Idemnifying Party 9.4(a)
---------------------------------------- ---------------------------------------
Idemnitee 9.4(a)
---------------------------------------- ---------------------------------------
"include; includes; including" 10.4(c)
---------------------------------------- ---------------------------------------
"knowledge" 10.4(b)
---------------------------------------- ---------------------------------------
Leased Premises 3.22(f)
---------------------------------------- ---------------------------------------
Leases 3.22(f)
---------------------------------------- ---------------------------------------
"made available" 10.4(e)
---------------------------------------- ---------------------------------------
Material Contracts 3.20
---------------------------------------- ---------------------------------------
"material" 10.4(a)
---------------------------------------- ---------------------------------------
Merger Sub Preamble
---------------------------------------- ---------------------------------------
Merger Recitals
---------------------------------------- ---------------------------------------
NASDAQ 4.3(a)
---------------------------------------- ---------------------------------------
Non-Competition Period 6.13(b)
---------------------------------------- ---------------------------------------
"ordinary course of business" 10.4(c)
---------------------------------------- ---------------------------------------
Other Document 3.3(d)
---------------------------------------- ---------------------------------------
Parent Preamble
---------------------------------------- ---------------------------------------
Parent Balance Sheet Date 4.5
---------------------------------------- ---------------------------------------
Parent Financial Documents 4.4
---------------------------------------- ---------------------------------------
Parent Financing 7.1(c)
---------------------------------------- ---------------------------------------
Parent Options 4.2(a)
---------------------------------------- ---------------------------------------
Parent SEC Documents 4.4
---------------------------------------- ---------------------------------------
Parent Stock Option Plan 4.2(a)
---------------------------------------- ---------------------------------------
Parent Warrants 4.2(a)
---------------------------------------- ---------------------------------------
Plans 3.15(a)
---------------------------------------- ---------------------------------------
Proceeding 3.7
---------------------------------------- ---------------------------------------
A-7
---------------------------------------- ---------------------------------------
Real Property 3.22(a)
---------------------------------------- ---------------------------------------
Recourse Amounts 9.2(b)(ii)
---------------------------------------- ---------------------------------------
Reference Balance Sheet Date 3.4(a)
---------------------------------------- ---------------------------------------
Reference Balance Sheet 3.4(a)
---------------------------------------- ---------------------------------------
Reference Income Statement 3.4(a)
---------------------------------------- ---------------------------------------
Registration Rights Agreement 7.2(h)
---------------------------------------- ---------------------------------------
SEC 2.11
---------------------------------------- ---------------------------------------
Xxxxx Preamble
---------------------------------------- ---------------------------------------
Stockholders Preamble
---------------------------------------- ---------------------------------------
Termination Exemption 8.3(b)
---------------------------------------- ---------------------------------------
Termination Fee 8.3(b)
---------------------------------------- ---------------------------------------
"the date hereof" 10.4(f)
---------------------------------------- ---------------------------------------
"the date of this Agreement" 10.4(f)
---------------------------------------- ---------------------------------------
Voting Agreement 7.2(j)
---------------------------------------- ---------------------------------------
A-8
EXHIBIT "B"
FORM OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
BIODELIVERY SCIENCES INTERNATIONAL, INC.
Acting pursuant to Sections 151(a) and (g) of the Delaware General
Corporation Law, the undersigned, Xxxxxxx X. X'Xxxxxxx, Xx., the duly elected
and acting Chairman, President and Chief Executive Officer of BioDelivery
Sciences International, Inc., a Delaware corporation, hereby certifies that the
Board of Directors of the Company duly approved the following Certificate of
Designation of Series A Non-Voting Convertible Preferred Stock of the Company on
July 29, 2004, and that the Certificate of Incorporation of the Company
expressly authorizes the Board to so designate and issue one or more series of
preferred stock, par value $.001 per share, of the Company. The designations,
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions thereof in respect
of the shares said Series A Non-Voting Convertible Preferred Stock of the
Company are as described in the following resolution, duly adopted by the Board
of Directors of the Company:
"WHEREAS, the Certificate of Incorporation of BioDelivery Sciences
International, Inc., a Delaware corporation (the "COMPANY") authorizes a class
(or classes) of up to five million (5,000,000) shares of preferred stock, par
value $.001 per share (the "PREFERRED STOCK"), and provides that such Preferred
Stock may be issued from time to time in one or more series and vests authority
in the Board of Directors of the Company (the "Board") to fix or alter the
rights, preferences, privileges, restrictions and other matters granted to or
imposed upon any wholly unissued series of the Preferred Stock;
WHEREAS, the Company has not heretofore issued any Preferred Stock; and
WHEREAS, it is the desire of the Board to fix and determine the rights,
preferences, privileges, restrictions and other matters relating to one million
six hundred forty-seven thousand and fifty nine (1,647,059) shares of Series A
Non-Voting Convertible Preferred Stock of the Company (the "SERIES A STOCK").
NOW, THEREFORE, BE IT RESOLVED, that pursuant to authority expressly
granted to and vested in the Board by the Certificate of Incorporation of the
Company, there is hereby created, out of the five million (5,000,000) shares of
Preferred Stock authorized in Article FOURTH of the Certificate of Incorporation
a series of Preferred Stock, consisting of one million six hundred forty-seven
thousand and fifty nine (1,647,059) shares and having the designations, powers,
number, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof set forth
below:
A. Authorized Number. One million six hundred forty-seven thousand and
fifty nine (1,647,059) of the authorized shares of Preferred Stock are hereby
designated "Series A Non-Voting Convertible Preferred Stock."
B. Designation. The rights, preferences, privileges, restrictions and
other matters relating to Series A Stock are as follows:
1. Dividend Rights. Holders of Series A Stock shall be entitled to
receive, pari passu with holders of common stock, par value $.001 per share, of
the Company (the "COMMON STOCK"), all cash or in-kind dividends or distributions
(including, without limitation, in the case of a distribution by the Company
spin-off of limited liability company interests in the Company's subsidiary,
Bioral Nutrient Delivery, LLC) on an as converted basis from time to time at any
time declared, set aside, or paid by the Company in an amount that would have
been received by the holders of Series A Stock (assuming, for purposes of the
calculation, that the holders of Series A Stock had lawfully converted such
Series A Stock into shares of Common Stock immediately prior to the record date
for determining the holders of Common Stock entitled to receive such
distribution at the then-applicable Series A Stock Conversion Rate), in each
case only when, as and if declared by the Board, and, in the case of cash
dividends, only out of funds that are legally available therefor. Such dividends
shall be non-cumulative.
2. Voting Rights. The holders of shares of Series A Stock shall not
have any voting or approval rights whatsoever except as expressly set forth
herein. Notwithstanding the foregoing, the Company shall not amend or modify
this Certificate of Designations without the prior written consent of the
holders of a majority of the then outstanding shares of Series A Stock.
3. Liquidation Rights.
(a) Upon any Liquidation Event (as defined below), subject to
the rights and preferences of any shares of the Company's preferred stock having
liquidation rights senior to those of the Series A Stock, the assets and funds
of the Company legally available for distribution to its stockholders shall be
distributed ratably (the "LIQUIDATION EVENT DISTRIBUTION") among the holders of
the Common Stock and Series A Stock as if such shares of Series A Stock had been
converted into Common Stock at the then-applicable Series A Stock Conversion
Rate immediately prior to such distribution, without any further action by the
holders of such shares; provided, however, that all declared and unpaid
dividends, if any, shall be paid in accordance with the provisions of Section
5(g) below; provided further, however, that the Company's obligations with
respect to the Liquidation Event Distribution shall be contingent upon the
delivery of the certificates evidencing such shares of Series A Stock to the
Company or its transfer agent as provided below, or the notification by the
holder to the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with such
certificates;
2
(b) For purposes hereof, the term "LIQUIDATION EVENT" shall
mean (i) any liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, or (ii) a transaction or series of related
transactions resulting in any of the following:
(A) a sale, lease, transfer, exchange or other
disposition of all or substantially all the assets of the Company;
(B) a merger (with or into any other entity),
consolidation, sale or reorganization.
(C) the transfer by one or more stockholders of
the Company of securities of the Company representing 50% or more of the
combined voting power of the then outstanding securities of the Company.
(c) Upon the occurrence of any Liquidation Event that would
involve the distribution of assets other than cash with respect to the
outstanding shares of Series A Stock, the amount of such distribution shall be
the fair market value thereof at the time of such distribution as determined in
good faith by the Board of Directors of the Company, and any securities to be
distributed in such event shall be valued as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability covered by subsection (ii)
hereof:
(A) if traded on a securities exchange
or through the Nasdaq National
Market or Nasdaq SmallCap Market,
the value shall be deemed to be the
average of the closing sales prices
of the securities on such exchange
over the 30-day period ending three
(3) business days prior to the
closing;
(B) if actively traded over-the-counter,
the value shall be deemed to be the
average of the closing sale prices
(whichever is applicable) over the
30-day period ending three (3)
business days prior to the closing;
and
(C) if there is no active public market,
the value shall be the fair market
value thereof, as reasonably
determined by the Board of Directors
of the Company in good faith.
(ii) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as provided in clauses (A), (B) or (C) of subsection (i) of
this subsection (c), to reflect the adjusted fair market value thereof, as
reasonably determined by the Board of Directors of the Company in good faith.
3
4. Redemption. There shall be no obligation on the part of the
Company to redeem any shares of Series A Stock nor on the part of any holder
thereof to submit any such shares for redemption.
5. Conversion Rights. The holders of Series A Stock shall have the
following rights with respect to the conversion of Series A Stock into shares of
Common Stock:
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 5, all (but not less than all; provided, however
that, in the event a holder of Series A Stock is prevented from converting all
of its shares of Series A Stock into Common Stock as a result of the limitation
referred to in Section 5(p) below, such holder (i) may immediately convert the
maximum number of shares of Series A Stock permitted to be converted thereunder
(all but not less than all) and (ii) shall be entitled to convert the balance of
such shares of Series A Stock into Common Stock upon the Company's obtaining the
requisite stockholder approval) of the shares of Series A Stock held by the
holders thereof may be converted, at the individual option of each such holder,
into fully-paid and non-assessable shares of Common Stock at any time following
(but not prior to) the earliest to occur of:
(i) on thirty (30) days written notice by such holder to
the Company following the occurrence of the Conversion Event;
(ii) the first approval by the U.S Food and Drug
Administration for the marketing and sale by the Company or any of its
subsidiaries of any of the following products: Emezine, BEMA-Fentanyl,
BEMA-Sumitriptan or any product which primarily incorporates technology similar
to the foregoing for the buccal delivery of pharmaceuticals ("FDA APPROVAL"); or
(iii) August [ ], 2009,
The number of shares of Common Stock to which a holder of Series A
Stock shall be entitled upon conversion shall be the product obtained by
multiplying the Series A Stock Conversion Rate (as defined below) then in effect
by the number of shares of Series A Stock being converted.
As used herein, the term "CONVERSION EVENT" shall mean the failure
of the Company to provide at least $3,000,000 (which amount shall not be subject
to surrender or repayment) to the surviving entity (the "SURVIVING ENTITY") in
that certain merger of Arius Pharmaceuticals, Inc. ("ARIUS") with and into Arius
Acquisition Corp., a wholly-owned subsidiary of the Company ("MERGER SUB") as
required to: (i) pay Atrix Laboratories, Inc. ("ATRIX") $1,000,000 by August 24,
2004 pursuant to the terms of that certain license agreement between Arius and
Atrix and (ii) fund, in a total amount of no less than $2,000,000, the
operations of the Surviving Entity in accordance with the Business Plan (as
defined in that certain Agreement and Plan of Merger and Reorganization, dated
August 10, 2004, among the Company, Arius, Merger Sub, Xxxx X. Xxxxx ("XXXXX"),
and Xxxxxx X. Xxxx ("XXXX"), subject to any changes to such Business Plan
mutually agreed upon by the Company and Xxxxx.
4
(b) Termination Conversion.
(i) Upon termination by the Company of Xxxxx'x
employment with the Company without Good Cause (as that term is defined in, and
otherwise in accordance with, that certain Employment Agreement between Xxxxx
and the Company, dated August [ ], 2004 (the "XXXXX AGREEMENT")) or the
termination of such employment by Xxxxx for Good Reason (as defined in the Xxxxx
Agreement), in either case prior to an FDA Approval, all (but not less than all,
subject to any limitations on the extent of such conversion under Section 5(p)
below) of the shares of Series A Stock held by Xxxxx may be converted, at the
option of Xxxxx, into fully-paid and non-assessable shares of Common Stock at
any time thereafter.
(ii) Upon termination by the Company of Xxxx'x
employment with the Company without Good Cause (as that term is defined in, and
otherwise in accordance with, that certain Employment Agreement, dated August [
], 2004 between Xxxx and the Company (the "XXXX AGREEMENT")) or termination of
such employment by Xxxx for Good Reason (as defined in the Xxxx Agreement),
prior to an FDA Approval in either case, all (but not less than all, subject to
any limitations on the extent of such conversion under Section 5(p) below) of
the shares of Series A Stock held by Xxxx may be converted, at the option of
Xxxx, into fully-paid and non-assessable shares of Common Stock at any time
thereafter.
The number of shares of Common Stock to which a holder of Series A
Stock shall be entitled upon conversion shall be the product obtained by
multiplying the Series A Stock Conversion Rate (as defined below) then in effect
by the number of shares of Series A Stock being converted.
(c) Conversion Rate. The conversion rate in effect at any time
for conversion of the Series A Stock (the "SERIES A STOCK CONVERSION RATE")
shall be the quotient obtained by dividing the Series A Stock Original Issue
Price by the Series A Stock Conversion Price (as defined below). The "SERIES A
ORIGINAL ISSUE PRICE" shall be Four Dollars and Twenty-Five Cents ($4.25) per
share.
(d) Conversion Price. The conversion price for Series A Stock
(the "SERIES A STOCK CONVERSION PRICE") shall initially be Four Dollars and
Twenty-Five Cents ($4.25) per share, which is equal to one hundred percent 100%
of the Series A Original Issue Price. Such initial Series A Stock Conversion
Price shall be adjusted from time to time in accordance with this Section 5. All
references to Series A Stock Conversion Price herein shall mean the Series A
Stock Conversion Price as so adjusted.
(e) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series A Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
5
(f) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series A Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A Stock. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Series A Stock, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(g) Notices. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
(h) Mechanics of Conversion. Each holder of Series A Stock who
converts the same into shares of Common Stock pursuant to this Section 5 shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company or any transfer agent for Series A Stock, and shall give written
notice to the Company at such office that such holder elects to convert the
same. Such notice shall state the number of shares of Series A Stock being
converted, which shall be no less than all of the shares of Series A Stock held
by the holder. Thereupon, or, with respect to any voluntary conversion of Series
A Stock following a Conversion Event, but prior to the occurrence of any other
condition permitting voluntary conversion of a holder's Series A Stock under
Section 5(a) or Section 5(b), no sooner than thirty (30) days following notice
from such holder regarding such conversion, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board as of the date of such conversion), any declared and
unpaid dividends on the shares of Series A Stock being converted. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series A
Stock to be converted, or, with respect to any voluntary conversion of Series A
Stock following a Conversion Event, but prior to the occurrence of any other
condition permitting voluntary conversion of a holder's Series A Stock under
Section 5(a) or Section 5(b), on the date thirty (30) days following notice from
such holder regarding such conversion, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock on such date.
(i) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the date that the first
share of Series A Stock is issued (the "SERIES A ORIGINAL ISSUE DATE") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of Series A Stock, the Series A Stock Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Series A Original Issue
Date combine the outstanding shares of Common Stock into a smaller number of
shares without a corresponding combination of Series A Stock, the Series A Stock
Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(i) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
6
(j) Adjustment for Common Stock Dividends and Distributions.
If the Company at any time or from time to time after the Series A Original
Issue Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Series A Stock
Conversion Price that is then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the Series A Stock Conversion Price
then in effect by a fraction (1) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and (2) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series A Stock Conversion
Price shall be recomputed accordingly as of the close of business on such record
date and thereafter the Series A Stock Conversion Price shall be adjusted
pursuant to this Section 5(i) to reflect the actual payment of such dividend or
distribution.
(k) Adjustments for Other Dividends and Distributions. If the
Company at any time or from time to time after the Series A Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, in each such event provision
shall be made so that the holders of Series A Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Company which they
would have received had their Series A Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date
of such event to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of Series A Stock or with respect to such other
securities by their terms.
(l) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Series A Original
Issue Date, the shares of Common Stock issuable upon the conversion of Series A
Stock is changed into the same or a different number of shares of any class or
classes of stock, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 5), in any such event each holder of Series A Stock shall have
the right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series A Stock could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustment as provided herein or with respect to such other
securities or property by the terms thereof.
7
(m) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the Series A Original Issue
Date, there is a capital reorganization of Common Stock (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5 or (ii) a
Liquidation Event, as defined in Section 3 above), as a part of such capital
reorganization, provision shall be made so that the holders of Series A Stock
shall thereafter be entitled to receive upon conversion of Series A Stock the
number of shares of stock or other securities or property of the Company to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
A Stock after the capital reorganization to the end that the provisions of this
Section 5 (including adjustment of the Series A Stock Conversion Price then in
effect and the number of shares issuable upon conversion of the Series A Stock)
shall be applicable after that event and be as nearly equivalent as practicable.
(n) Certificate of Adjustment. In each case of an adjustment
or readjustment of the Series A Stock Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of Series A Stock,
if Series A Stock is then convertible pursuant to this Section 5, the Company,
at its expense, shall compute such adjustment or readjustment in accordance with
the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of Series A Stock at the holder's address as
shown in the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (1) the consideration received
or deemed to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued or sold, (2) the Series A
Stock Conversion Price at the time in effect, (3) the number of Additional
Shares of Common Stock and (4) the type and amount, if any, of other property
which at the time would be received upon conversion of the Series A Stock.
(o) Notices of Record Date. Upon: (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other entity, or any
transfer of all or substantially all of the assets of the Company or any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to each holder of Series A Stock at least ten (10) days
prior to the record date specified therein a notice specifying (1) the date on
which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such acquisition, reorganization, reclassification, transfer,
consolidation, merger, asset transfer, dissolution, liquidation or winding up is
expected to become effective, and (3) the date, if any, that is to be fixed as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such acquisition, reorganization,
reclassification, transfer, consolidation, merger, asset transfer, dissolution,
liquidation or winding up.
8
(p) 19.99% Limitation. Notwithstanding anything in this
Certificate of Designations to the contrary, if, at the time that any shares of
Series A Stock are converted pursuant to the terms hereof, the Common Stock is
listed for quotation on The Nasdaq SmallCap Market or The Nasdaq National Market
(collectively, "NASDAQ"), then, without the prior approval of the Company's
stockholders in accordance with the rules of Nasdaq, in no event shall the
Company issue shares of Common Stock upon conversion of the Series A Stock to
the extent that the total aggregate number of shares of Common Stock issued or
deemed to be issued at any time to any holder or all holders of Series A Stock
would exceed 19.99% of the issued and outstanding shares of Common Stock
immediately prior to the effective time of the merger of Arius Pharmaceuticals,
Inc., a Delaware corporation, with and into Arius Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company.
6. No Reissuance of Series A Stock. No share or shares of
Series A Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued. In addition, this Certificate of
Designations shall be appropriately amended to effect the corresponding
reduction in the Company's authorized stock.
7. No Preemptive Rights. No stockholders of the Company,
including, without limitation, the holders of Series A Stock, shall have
preemptive rights.
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9
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
of Series A Non-Voting Convertible Preferred Stock to be duly executed by its
President and Chief Executive Officer and attested to by its Secretary on this
____ day of August, 2004.
BIODELIVERY SCIENCES INTERNATIONAL, INC.
By:
------------------------------------
Name: Xxxxxxx X. X'Xxxxxxx, Xx.
Title: President and Chief
Executive Officer
ATTEST:
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Xxxxx X. XxXxxxx, Secretary
